Sebi Overhauls Governance Structure At MIIs, Calls For Two New Executive Directors

The Securities and Exchange Board of India (Sebi) has moved to tighten the governance machinery at Market Infrastructure Institutions (MIIs) by insisting that each of them appoint two executive directors. The regulator believes that splitting responsibilities at the top level will strengthen day-to-day supervision as well as the handling of regulatory matters.

Clearer Roles, Stricter Hiring

Under the new set-up, one ED will be made responsible for all critical operations, while the second will look after regulatory work, compliance, risk functions, and investor grievances. Both officials will sit on the governing board, giving operational leadership a formal voice in broader decision-making.

To avoid closed-door selections, MIIs will now have to advertise ED vacancies publicly. Applicants are expected to have the right background for the vertical they are applying to, and each MII must send Sebi at least two shortlisted names for every ED post, along with the proposed pay package. Any later change in compensation will also need Sebi’s nod.

Sebi has spelt out continuity norms as well. MIIs must forward names for ED positions at least two months before an existing ED’s term ends. Their performance reviews will be overseen by Public Interest Directors, following the same annual evaluation method used for managing directors.

The regulator has allowed some flexibility, acknowledging that MIIs differ in scale and may face operational hurdles. Institutions may request temporary exemptions, which Sebi will examine individually.

More Oversight, Revised Reporting Lines

Both EDs will report directly to the managing director. Beyond that, Sebi has rearranged the oversight system so that committees can interact with EDs independently.

For the ED handling critical operations, the Standing Committee on Technology will meet every quarter without the MD or other senior executives present, giving the committee space to review performance independently. Its views, along with those of the MD, will go to the Nomination and Remuneration Committee for appraisal.

On the regulatory side, the Regulatory Oversight Committee and the Risk Management Committee will hold separate quarterly meetings with the ED in charge of compliance and risk. Their feedback will feed into the NRC’s assessment.

Both EDs will present a quarterly review of their verticals to the governing board and may escalate urgent matters directly to Sebi if required.

Reporting structures for key personnel have also been revised. All technology and operations heads under Vertical 1, including the CTO and CISO, will now report to its ED. The Compliance Officer and Chief Risk Officer will report to the ED, handling regulatory work. Statutory committees will, however, continue to meet these officials every quarter independently of the EDs.

Sebi has also spelt out how the Chief Risk Officer’s role will function under the new set-up. The CRiO will now take charge of all technology audits, whether routine system checks or cybersecurity reviews, and will be present at SCOT meetings whenever required, though only in an invitee capacity.

On the rollout front, the regulator has chosen a staggered timetable. MIIs have been asked to bring the first executive director on board within six months of the regulatory changes coming into force. The second appointment should follow within nine months. The idea is to give institutions enough breathing room to adjust to the revised governance structure without disrupting ongoing operations.