SEBI looks to broaden director pool and set uniform standards for key tech & risk roles

The Securities and Exchange Board of India (SEBI) has floated a fresh consultation paper that essentially says, “let’s make it easier to find the right people for the boards of our market infrastructure institutions (MIIs).” In plain English, the regulator wants to loosen the strict rules that currently bar many potential candidates from becoming directors of stock exchanges, clearing corporations and depositories.

Right now, if you sit on the board of a broker, a clearing member or even an associate of such entities, you are automatically deemed ineligible for an MII board. The same logic applies to directors linked with depository participants. SEBI argues that these provisions are becoming a real bottleneck, especially for large financial conglomerates that juggle several subsidiaries behind so‑called “Chinese walls.”

In the paper, the regulator writes, “a director of a company in a conglomerate should not become ineligible as a director in an MII just because the holding company has a separate subsidiary in the business of trading member/clearing member or depository participant.” The gist is simple – don’t punish a qualified individual just because the group they belong to has a diverse set of businesses.

To address this, SEBI proposes extending the existing carve‑out that currently benefits directors of public‑sector banks and financial institutions to private firms that have a well‑diversified shareholding pattern. Under the new definition, a company would be considered well‑diversified if no shareholder (other than a public‑sector one), either alone or acting in concert, holds 10 % or more of the equity or voting rights.

Beyond the board‑level changes, the regulator is also nudging MIIs to adopt a standardised framework for four critical senior roles – Chief Technology Officer (CTO), Chief Information Security Officer (CISO), Compliance Officer (CO) and Chief Risk & Information Officer (CRiO). These positions, SEBI notes, are not just back‑office functions; they are central to the integrity and smooth running of the capital markets.

At present, each MII’s governing board decides on appointments, reappointments or resignations for these roles without any uniform checklist. The new proposal would require the board to approve a Standard Operating Procedure (SOP) for each post, drawing inputs from the relevant statutory committees – the Standing Committee on Technology for CTO and CISO, the Regulatory Oversight Committee for the Compliance Officer, and the Risk Management Committee for the CRiO.

Another practical tweak is the three‑month deadline for filling any vacancy in these key positions. If a role is expected to become vacant, the institution must plan ahead so that there is no disruption in critical functions. SEBI is also asking for public feedback on whether each MII should be obliged to appoint a deputy for these posts, ensuring continuity if the primary executive leaves suddenly.

Comments on both the director‑eligibility and the executive‑qualification proposals are being sought until September 30, 2026. Stakeholders from the industry, academia and the public are encouraged to weigh in, shaping what could be a significant shift in how India’s market infrastructure is governed.