New SEBI Chairman Tuhin Pandey Leads Board Review
The Securities and Exchange Board of India (SEBI) is gearing up for a significant meeting under the leadership of its new Chairman, Tuhin Kanta Pandey, scheduled for March 24. This pivotal gathering is poised to address various crucial regulatory decisions that will shape the financial landscape for the upcoming fiscal year 2025-26. Among the key agenda items are the autonomy of clearing corporations, the introduction of a close auction session in the cash market, and the appointment procedures for public interest directors (PIDs) and essential personnel at market infrastructure institutions (MIIs).
Clearing Corporations’ Independence
One of the primary issues on the table is the independence of clearing corporations, a move that could potentially alter the landscape by diluting the shareholding of major stock exchanges in their respective clearing houses. While there is a consensus among regulators and industry experts on the necessity of this independence and diversification of ownership, the specifics are still being ironed out. SEBI is contemplating setting thresholds for minimum and maximum shareholding of exchanges in clearing corporations, paving the way for divestment through an “offer for sale” scheme, akin to previous corporatisation and demutualisation initiatives.
PID Appointments
Additionally, SEBI is poised to finalize a framework for the appointment and reappointment of public interest directors at market infrastructure institutions. While two options are on the table, the existing process, which circumvents the need for shareholder approval, is likely to be retained. A streamlined documentation process involving a two-stage method of shortlisting candidates and seeking detailed documentation for final appointments is under consideration. Furthermore, existing PIDs will not have automatic eligibility for reappointment, as SEBI aims to empower the governing boards of MIIs in the decision-making process.
Other Likely Reforms
Beyond these critical decisions, the SEBI board is expected to ratify a series of reforms that could have far-reaching implications. Changes to the framework for angel funds, aimed at onboarding only accredited investors as angel investors and easing AIF regulations, are on the agenda. The potential expansion of the definition of qualified institutional buyers (QIB) to include accredited investors and the removal of the 200-investor cap for private placement offers are also under consideration. Moreover, SEBI might introduce a cooling-off period for key management personnel (KMPs) and directors of MIIs joining competing institutions, aligning with industry standards while avoiding the formation of an external committee for KMP appointments.
In addition, the regulator may enhance the framework for ESG Rating Providers (ERP) to streamline ratings withdrawal and disclosure practices. Clarity on Business Responsibility and Sustainability Reporting standards, in line with international ESG norms, is also on the horizon. While proposed changes to risk monitoring in equity derivatives, including revised position limits, are not expected to be addressed in this meeting due to lingering industry divisions on their impact, SEBI remains committed to fostering a transparent, resilient financial ecosystem.
The upcoming SEBI meeting, under the guidance of Chairman Tuhin Pandey, promises to be a defining moment in the regulatory landscape, with decisions that could shape the future of India’s financial markets. Stay tuned for updates on these pivotal developments that will impact investors, stakeholders, and market participants alike.
