Sebi Plans To Appoint Executive Directors At Stock Exchanges, Depositories For Stronger Oversight

The Securities and Exchange Board of India (Sebi) has proposed to appoint two Executive Directors (EDs) at key market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories. While one director will focus on day-to-day operations, the other will be in charge of regulatory compliance, risk management, and handling of investor grievances. Though, apart from the two EDs, MIIs can also appoint a third ED to oversee other functions of MIIs such as business development, but that is up to the respective MIIs as per Sebi.

The proposals are part of a consultation paper Sebi issued on Tuesday, June 24.

Currently, the Managing Director (MD) holds overall authority for all the three areas. Apart from the MD, the governing board of an MII comprises of other key management personnel such as Non-Independent Directors (NIDs) and Public Interest Directors (PIDs).

Why Do MIIs Need Two EDs

India has seen a rapid growth in its securities markets in recent years and accordingly, MIIs have been raking in higher revenues and profits. The regulator wants to ensure that their priorities don’t drift towards pure commercial gains, but stay anchored in public interest, investor protection, and strong compliance with Sebi norms. Therefore, it has proposed to appoint EDs who will specifically oversee operations and regulatory functions at MIIs.

“The phenomenal growth in the securities market over recent years, driven by increased market capitalisation, trading volumes, technology adoption, investor base, and market intermediaries has significantly amplified the role of MIIs as first-line regulators. Any failure or mis-governance in these critical institutions could have an adverse impact on the securities market and the broader economy,” said the regulator in its consultation paper.

“To ensure the orderly functioning and development of the securities market, it is crucial that MIIs give priority to, and are seen to give priority to, public interest over commercial interests and business development,” the regulator added.

Further, the regulator added, there is often a huge gap in authority, stature, and compensation between the MD and other key management personnel. So, it is deemed necessary to elevate the roles of executives heading critical operations and regulatory functions by giving them board-level representation and decision-making authority.

Other Regulatory Proposals Made By Sebi

Sebi has also called for a stronger role for key management personnel like the Chief Technology Officer, Chief Information Security Officer, Chief Risk Officer, and Compliance Officer, in order to make the internal systems more resilient and improve oversight from within.

Another major proposal the regulator made is to restrict external board positions held by top brass at MIIs. The MD will be allowed to sit on the board of a non-profit company or a government-owned firm that does not run a commercial business. However, the newly proposed EDs will not be allowed to hold board positions in any company, except for subsidiaries of their own MII.

Sebi has invited public feedback on these proposals and is accepting comments until July 15.

How Appointing EDs Might Improve Governance

Saptarshi Pandey, Founder of Investeem India, a wealth management and financial advisory company told Outlook Money that the proposal to appoint EDs at MIIs is a “significant” and “much-needed” step.

“This will not only ensure balanced governance but also give equal weightage to risk controls and investor safety in an increasingly high-volume, high-frequency market,” Pandey said.

He believes this will bring transparency, faster escalation of risks, and structured feedback. “It will help ensure that the voices of technology, operations, and risk aren't overshadowed by revenue-driven goals,” he said.

Would This Undermine MD's Authority

According to Trivesh D, COO of Tradejini, a discount brokerage firm, Sebi’s move to add two senior executives to the boards of MIIs dilutes the MD's authority, however, he added that it would also strengthen overall governance. He explained that the newly proposed Executive Directors, who will hold positions equal in stature to the MD, will bring essential oversight in critical operations and risk management.

"Rather than creating confusion, their clearly defined roles and direct reporting to the governing board and SEBI offer clarity, not conflict," he said.

While the MD will continue to lead all verticals, the EDs will focus exclusively on specific areas. This would ensure there is no overlap in responsibilities, he said. Trivesh also highlighted that regular meetings between the EDs and key board committees, held without the MD, add another layer of accountability.

"At the end of the day, this is not about a power struggle, it is about stronger governance that protects public interest without taking away from the MD’s leadership," he concluded.