India’s market regulator, the Securities and Exchange Board (SEBI), on Wednesday proposed easing restrictions that limit who may sit on the boards of stock exchanges and other market infrastructure institutions. SEBI said the change is intended to address difficulties in finding qualified candidates under the current regulatory regime.
Under existing rules, individuals who have connections to stock brokers and other market intermediaries are generally barred from joining the boards of stock exchanges, clearing corporations and depositories. SEBI noted that these provisions can disqualify candidates even when their link to a market intermediary is indirect - a scenario that often arises within large business groups containing multiple independently operated subsidiaries.
To tackle that problem, SEBI proposed permitting directors of widely held companies to serve on the boards of market institutions, even if another member of their corporate group runs brokerage, clearing or depository operations. The regulator set out a specific threshold to define a widely held company: one in which no private shareholder, acting alone or together with related parties, owns or controls 10% or more of the company. SEBI said public-sector shareholders would not be counted toward that 10% threshold.
SEBI indicated that narrowing the disqualification criteria in this manner could help attract more experienced professionals to governance roles at exchanges, clearing houses and depositories. The proposal explicitly addresses the regulator's concern that the present rules exclude potential board members because of indirect or group-level relationships rather than direct involvement with market intermediation.
The proposal outlines the new ownership test and the exception for public-sector holdings, but it does not claim any immediate effect on current board compositions. SEBI framed the changes as a way to expand the pool of eligible candidates while preserving the objective of preventing conflicted oversight of core market infrastructure.
Summary
SEBI has proposed revising eligibility rules so directors of widely held companies may serve on exchange, clearing and depository boards even when another company in their group operates as a broker or clearing member. The regulator defined "widely held" as companies without any private shareholder or related party holding 10% or more, excluding public-sector stakes from that calculation. SEBI said the proposal could help bring more experienced directors onto market institution boards.