SEBI Proposes Changes To MII Board Director Criteria And KMP Appointment Process

On 9 September, the Securities and Exchange Board of India (SEBI) issued a consultation paper proposing measures to strengthen the governance of Market Infrastructure Institutions (MIIs), including revised criteria for appointment of directors to MII Governing Boards and a Standard Operating Procedure (SOP) for appointment of certain key managerial personnel.

SEBI said MIIs were facing difficulties in finding suitable directors, particularly Public Interest Directors, due to restrictive provisions. It noted that these provisions could also disqualify directors of companies forming part of conglomerates merely because an associate company is a trading member, clearing member or depository participant.

The regulator has proposed extending the existing carve-out for directors of public-sector financial institutions and banks to directors of companies with trading member, clearing member or depository participant associates, provided they have well-diversified shareholding. It also proposes to define this as a shareholding structure where no shareholder, other than public-sector shareholders, individually or with persons acting in concert, holds 10% or more of the stake or voting rights or exercises such control.

Further, the consultation paper proposes an SOP specifying the qualification, experience, skill set and certification requirements for key managerial personnel, including the Chief Technology Officer (CTO), Chief Information Security Officer (CISO), Compliance Officer (CO) and Chief Risk Officer (CRiO).

The SOP would be approved by the MII's Governing Board based on inputs from the relevant statutory committees. The Standing Committee on Technology would provide inputs for the CTO and CISO, the Regulatory Oversight Committee for the CO, and the Risk Management Committee for the CRiO.

SEBI has also proposed that vacancies in these positions be filled expeditiously, with advance planning where a vacancy is anticipated. In any case, the positions should be filled within three months of the vacancy.

Public comments on the proposals have been invited until 30 September 2026.