Sebi wants NSE to give four names for top job

Market regulator to then select from the shortlist

Capital market regulator Securities and Exchange Board of India (Sebi) wants the National Stock Exchange of India (NSE) to send the names of four likely candidates for the top job at the exchange. Sebi will then select the chief executive officer-cum-managing director from among this shortlist of names, sources said.

This seems to be a departure from the usual practice of selecting an exchange chief — whereby it is the exchange that zeroes in on one candidate of its choice and forwards the name to the market regulator for final approval. “NSE will have to send us four names. We will then approve one name,” said a senior Sebi official.

Sources said that NSE had so far not received any communication in this regard from the regulator. NSE is of the view that they may have to send one final name for the market regulator for its approval, they add.

Legal experts say the guidelines on the appointment process are open to interpretation. “The appointment of a stock exchange's managing director is subject to Sebi's prior approval and Sebi in its discretion can prescribe the manner of appointment and other procedural formalities associated with the selection and appointment of the managing director,” said Tejesh Chitlangi, partner, IC Legal, a law firm. “Securities Contracts (Regulation) (SECC) Regulations vest the regulatory discretion with Sebi to prescribe any procedural conditions with respect to the MD's appointment.” 

NSE’s board of directors had kickstarted the process for selection of the new MD & CEO in early December and had set up a selection committee for the same as per SEBI guidelines. An email sent to NSE did not get a response. 

The selection committee comprises two public interest directors at NSE, Dinesh Kanabar and Mohandas Pai, and two independent experts, Anand Mahindra, chairman of the Mahindra Group, and Usha Thorat, former deputy governor at the Reserve Bank of India. Executive search firm Egon Zehnder has been hired to screen and shortlist the applicants, which will then be forwarded to the selection  committee. NSE is looking to complete the selection process before the end of next month.

Experts believe that Sebi should not be directly intervening in the selection process. “It is the exchange which should take ownership of the decision to select the right candidate. At best Sebi can veto a choice which they make,” said Sandeep Parekh, managing partner, Finsec Law Advisors. 

NSE had issued an advertisement on December 20 for applications, and is expected to send the selected names by early February to Sebi for approval.

The appointment of the exchange’s chief is important, coming as it does ahead of its initial public offering and after the abrupt departure of its MD and CEO Chitra Ramkrishna, who resigned, citing personal reasons. NSE had filed its draft prospectus with Sebi last month and intends to offer around 111 million shares, representing 22.5 per cent of the post-offer paid up equity capital of the company.

Group president J Ravichandran has been appointed as the interim CEO for the bourse.