Sebi plans to tighten appointment rules for top executives at MIIs

The Securities and Exchange Board of India (Sebi) is planning to tighten rules governing the appointment process for top executives at market infrastructure institutions (MIIs) such as exchanges, clearing corporations and depositories. 

According to sources, MIIs might have to appoint managing directors (MDs) and chief executive officers (CEOs) afresh after the completion of their tenure. At present, the tenure of MDs and CEOs is extended by the board and is sent for Sebi’s approval without a formal appointment process.

The move comes at a time the Reserve Bank of India (RBI) is said to have raised objections over Axis Bank’s decision to reappoint Shikha Sharma as MD and CEO for the fourth term.

“If an MII decides to reappoint an existing person, the nomination and remuneration committee will have to provide justification for the move. The committee will have to perform a thorough performance appraisal of the tenure before pitching for re-appointment,” said a person in the know.

Sources said the issue of reappointment of MDs and CEOs was discussed at the last meeting of a Sebi committee set up to review regulations pertaining to MIIs. The panel is be headed by R Gandhi, former deputy governor of RBI.

“Sebi wants to ensure that CEOs at important institutions don’t misuse their position by getting long tenures,” said a source.

The market regulator will firm up its view on the issue once the Gandhi committee submits its recommendations. If the rules around reappointment of MDs and CEOs are tightened, the National Stock Exchange (NSE) and the BSE will have to provide justification for offering further extension to their chiefs.

The tenure of Ashish Chauhan, MD and CEO, BSE, expires in November 2022. Chauhan’s first five-year tenure started in 2012, which was extended by another five years in 2017.

Vikram Limaye, MD and CEO, NSE, was appointed for five years last year after Chitra Ramkrishna quit unexpectedly.

The tenure of the heads of both Central Depository Services (CDSL) and National Securities Depository (NSDL) is up for renewal soon.

The tenure of G V Nageswara Rao, MD and CEO, NSDL, ends in July. He joined the depository in July 2013. The tenure of P S Reddy, MD and CEO, CDSL, ends later this month. 

According to reports, Sebi has rejected a five-year extension offered to Reddy by the CDSL board. He had joined in 2012 for a five-year tenure, which was expended by a year in 2017.