BackSebi panel suggests steps to improve governance at bourses, depositories
The Sebi panel suggested mandatory rotation of key management personnel, capping salaries for such personnel at bourses and increasing the proportion of public interest directors
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Mumbai: A Securities and Exchange Board of India (Sebi) constituted committee to review norms for market infrastructure institutes has recommended steps to improve governance at exchanges, depositories, clearing corporations and registrar agents, according to two people with direct knowledge of the matter.
According to these people, the panel headed by former Reserve Bank of India (RBI) governor R. Gandhi, suggested mandatory rotation of key management personnel, capping salaries for such personnel at bourses and increasing the proportion of public interest directors (PIDs).
This is also the first time the panel has recommended bringing registrars under norms that govern market infrastructure institutions, said one of the people cited earlier on condition of anonymity.
“The registrars have an important role to play in the market; so, having some rules at par with market infrastructure institutions was considered," he said.
Registrar or transfer agents are the trusts or institutions that register and maintain detailed records of the transactions of investors.
BSE Ltd declined to comment.
Emails sent to NSE and Sebi were not answered till press time.
The last review of market infrastructure institutes was done in 2012 by a panel under Bimal Jalan.
That panel had recommended a review every five years.
“The current proposals are looking to plug the governance lapses that came to light in the past 2-3 years at India’s top exchanges. The proposals are to ensure that the boards of such entities function independent of the management," said the second of the two people cited earlier.
According to the two people cited earlier, the Gandhi panel’s specific recommendations include that the nomination and remuneration committee of a market infrastructure institute define key management personnel and rotating them every three-to-five years.
It has also recommended that managing directors be appointed for only two terms of five years each.
“MDs would undergo an appraisal by the NRC," said the second of the two people.
“PIDs would be 2/3 of the board members, and follow a transparent hiring process," said the first person.
Sebi should soon put the report up for public comments.
According to J.N. Gupta of Stakeholder Empowerment Services and a member of the Bimal Jalan committee, the PID selection should be transparent.
“Having majority PIDs is not enough, the selection should be transparent and there should be an age barrier. While the rotation of KMP is a good idea, Sebi would need to evaluate whether it is practical, KMP should need to have some domain expertise and not rotated unceremoniously," said Gupta.
A person familiar with the thinking at a national level exchange said most exchanges follow similar standards.
“Even today, exchanges have a higher number of PIDs and appointments are vetted by Sebi. But any change that bring about more transparency at exchanges is a welcome step. Rotation of KMPs seem a little tricky but we need to wait for the final report for the fine print," he said.
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