SEBI Introduces New Governance Norms for KMPs and PIDs in Market Infrastructure Institutions

The Securities and Exchange Board of India (SEBI) has issued a Circular dated May 26, 2025, outlining new governance norms for Key Management Personnel (KMPs) and Public Interest Directors (PIDs) in Market Infrastructure Institutions (MIIs). This includes stock exchanges, clearing corporations, and depositories. The circular introduces stringent rules for the appointment and removal of KMPs, cooling-off periods, and non-reappointment disclosures for PIDs.

SEBI mandates that appointments of senior personnel such as the Chief Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO) must be made through an independent external agency. Final approval for these appointments must come from the Governing Board of the MII. Additionally, the termination or resignation of KMPs requires board-level involvement, and no KMP may be dismissed without a fair hearing.

The cooling-off period for KMPs, including Managing Directors, moving to a competing MII will now be determined by the respective Governing Board of the MII. This is a significant change from the earlier fixed one-year requirement under SECC and D&P regulations. The flexibility in setting the cooling-off period aims to align with the specific needs and contexts of different MIIs.

In cases where a Public Interest Director (PID) is not re-appointed after completing their first term, MIIs are required to record the reason for non-reappointment and inform SEBI. This new requirement adds a layer of transparency to the governance process, ensuring that the public interest role of MIIs in the securities market is upheld.

The provisions of this circular will come into effect 90 days from the date of issuance, i.e., from August 24, 2025. MIIs have been instructed to amend their internal rules, inform market participants, and publish the circular on their official websites. The circular, issued under the powers granted by the SEBI Act, 1992, and related regulations, aims to strengthen oversight, promote transparency, and uphold the public interest role of MIIs in the securities market.

These new norms are expected to enhance the overall governance and operational standards of MIIs, ensuring that they operate in a fair and transparent manner. The measures are designed to protect the interests of investors and the broader financial ecosystem.