SEBI Tightens Governance Norms to Strengthen Oversight of Market Institutions

The Securities and Exchange Board of India has revised governance norms for market infrastructure institutions to strengthen oversight, enhance public interest safeguards and improve operational integrity. The new directions clarify the roles, responsibilities and reporting structure of senior management personnel in MIIs and will come into force from December 20, 2025.

Clearer Roles for Senior Management

Through a circular issued on Friday, SEBI outlined amendments aimed at bringing greater clarity to senior management duties within MIIs. Executive Directors handling critical operations and regulatory compliance will now be mandatory members of the governing board. Their appointment process must be conducted through open advertisement, reinforcing transparency and merit-based selection.

Approval and Oversight of Executive Directors

SEBI has mandated that the compensation and terms of appointment of Executive Directors require prior approval from the regulator. Any subsequent change in their remuneration or service conditions cannot be made without board approval. In addition, MIIs must submit proposed names to SEBI at least two months before the last working day of an existing Executive Director, ensuring continuity and regulatory oversight.

Reporting Structure and Performance Review

Under the revised framework, Executive Directors will report to the Managing Director, while their performance will be evaluated independently by designated committees. They will also be required to submit quarterly reports to the governing board on matters related to their respective verticals. Where necessary, Executive Directors may directly escalate critical issues to SEBI, strengthening regulatory communication.

Exam Oriented Facts

• Market Infrastructure Institutions include stock exchanges, clearing corporations and depositories.
• The revised SEBI directions take effect from December 20, 2025.
• Executive Directors must now be part of the governing board of MIIs.
• SEBI approved these amendments at its board meeting in September 2025.

Implementation Timelines and Structural Changes

The circular specifies that MIIs must appoint the first Executive Director within six months and the second within nine months from the implementation deadline. Key managerial personnel such as the Chief Technology Officer and Chief Information Security Officer will now report to their respective Executive Directors, altering earlier reporting lines. MIIs are also required to amend byelaws, upgrade internal systems and formally inform market participants of the governance changes.