In a significant move aimed at bolstering the governance framework of Market Infrastructure Institutions (MIIs), the Securities and Exchange Board of India (SEBI) released a circular on May 26, 2025. The circular outlines the formal process for the appointment, re-appointment, termination, or acceptance of resignation of Key Management Personnel (KMPs) in MIIs. It also introduces a cooling-off period for KMPs joining competing institutions and provides new norms on the re-appointment of Public Interest Directors (PIDs).
Enhancing the Role of Key Management Personnel
MIIs, comprising stock exchanges, clearing corporations, and depositories, are essential pillars of the Indian capital market. To safeguard their role as public interest institutions, SEBI has tightened the oversight of personnel in crucial verticals — compliance, risk management, technology, and information security. The new directive emphasizes that KMPs such as the Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO) must possess the appropriate independence, experience, and integrity.
These verticals — referred to as Vertical 1 (compliance and risk management) and Vertical 2 (technology and information security) — form the backbone of market stability. SEBI’s clear message is that MIIs must prioritize regulatory and public interest objectives over commercial goals, with operational leadership reflecting this culture.
The New Appointment Process
To ensure transparency and eliminate potential biases, SEBI now mandates the involvement of an independent external agency in identifying and recommending suitable candidates for KMP positions. The process is structured as follows:
Identification: An independent agency is engaged to scout for qualified professionals for the roles of CO, CRiO, CTO, and CISO.
Recommendation: This agency submits its shortlisted candidates to the MII’s Nomination and Remuneration Committee (NRC).
Evaluation: The NRC evaluates the recommendations in consultation with MII management and forwards its final suggestions to the Governing Board.
Final Decision: The Governing Board of the MII makes the final appointment decision.
This multi-tiered approach is intended to inject independence, objectivity, and accountability into the process, aligning personnel choices with the broader regulatory and public utility mandate of MIIs.
Focus Beyond Appointments
In addition to KMP appointment norms, the circular introduces a cooling-off period for KMPs moving to rival MIIs. This is a strategic move to safeguard sensitive operational knowledge and reduce conflict of interest risks.
Moreover, SEBI has updated provisions relating to the re-appointment of Public Interest Directors (PIDs), ensuring that their continuation in office is strictly evaluated based on performance and the evolving needs of MIIs.
Conclusion
SEBI’s latest circular marks a pivotal shift in how MIIs are expected to manage leadership roles central to regulatory integrity. By formalizing appointment processes and prioritizing public interest, SEBI reinforces its commitment to ensuring that MIIs function not just as commercial entities, but as vital institutions of trust and transparency in India’s financial ecosystem. The move is a critical step toward building resilient, accountable, and investor-focused market infrastructure.
