Sebi Tightens Governance with Cooling-Off Mandate for Directors

Sebi has enhanced governance practices for market infrastructure institutions by instituting a mandatory cooling-off period for directors moving between competing entities. This change, detailed in separate notifications, ensures market integrity by preventing immediate cross-institutional appointments without regulatory approval.

The Securities and Exchange Board of India (Sebi) has introduced new governance guidelines aimed at reforming the leadership protocols within market infrastructure institutions, including stock exchanges, clearing corporations, and depositories.

According to the latest amendment to the SECC Regulations, 2018, and Depositories and Participants norms 2018, a cooling-off period must now be observed by non-independent directors before they can be appointed to a competing institution. Sebi's mandate ensures that any directorship transitions between similar entities are both planned and vetted, aiming to fortify market integrity.

In announcements made at the end of April, Sebi specified that the cooling-off applies particularly to public interest directors aiming to transition within similar market infrastructure institutions. The directive comes as a result of evaluations conducted in March, targeting the harmonization of leadership appointments and minimizing conflicts of interest across the sector.

(With inputs from agencies.)