Sebi tightens grip on boards of MIIS
The Securities and Exchange Board of India (Sebi) has increased its oversight on the board composition of market infrastructure institutions (MIIS), which include stock exchanges, clearing corporations, and depository firms.
Both National Stock Exchange (NSE) and BSE have seen exits of their shareholder directors after lengthy tenures. Meanwhile, the two depository firms — the National Securities Depository (NSDL) and the Central Depository Services India (CDSL) — have seen the induction of new shareholder directors this year.
The regulator already has a strict framework in place dictating the appointments and tenures of public interest directors at the stock exchanges. However, it appears the regulator has trained its guns on the tenures of shareholder directors, who can have lengthier stays as they are governed by the more liberal framework under the Companies Act.
“In terms of Sebi letter dated February 17, 2020, the NSE is advised not to forward the names of Abhay Havaldar and Prakash Parthasarthy for reappointment to the NSE board as and when appointment is due,” the exchange has mentioned in its annual report for 2019-20.
Both Havaldar and Parthasarthy have served on the NSE board for more than eight years. They were
It appears the regulator has trained its guns on the tenures of shareholder directors, who can have lengthier stays
nominated on the board by General Atlantic and Premjiinvest, respectively. Another shareholder director nominated by Life Insurance Corporation (LIC), Sunita Sharma, however, has got the regulator’s nod for re-appointment. She has been associated with the NSE since October 2016.
Not just the NSE, but the BSE also has seen its shareholder director leaving. According to the BSE’S 2019-20 annual report, Usha Sangwan, nominated by LIC, whose tenure ended in June requested the exchange not to re-appoint her, citing “personal and health reasons". She was appointed to the BSE board in September 2016.
Experts say the trend clearly suggests the regulator is in favour of shorter tenures for independent directors that serve on the boards of MIIS. There are two kinds of independent directors that serve on the board of MIIS -- public interest directors (PIDS) and shareholder directors.
A shareholder director is nominated by dominant shareholders. PIDS are appointed by the exchanges and Sebi. Their objective is to safeguard the larger interest of the securities market. MIIS need to have equal or more PIDS than shareholder directors on their boards. PIDS are appointed for a period three years and can have a maximum of two tenures with a single MII and one more tenure with another MII after a year of cooling off.
Meanwhile, the appointment of shareholder directors is governed by the Companies Act, which allows tenure of up to five years and reappointment by way of a special resolution.