Sebi Introduces New Guidelines for Performance Evaluation of Market Infrastructure Institutions and Statutory Committees

The Securities and Exchange Board of India (Sebi) has introduced new guidelines to standardise the evaluation of statutory committees within market infrastructure institutions (MIIs). These MIIs, which include stock exchanges, clearing corporations, and depositories, must now appoint an independent external agency for performance evaluations every three years. This initiative aims to enhance transparency and accountability in their operations.

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According to Sebi's circular, the first evaluation will cover the 2024-2025 financial year, with a report submission deadline set for September 30, 2025. The evaluation will assess various aspects such as committee roles and responsibilities, meeting effectiveness, and governance practices. Sebi has emphasised that these evaluations are crucial for maintaining consistent standards across MIIs.

External Evaluation Requirements

MIIs are required to seek Sebi's approval before appointing an external agency. The chosen agency must possess expertise in the securities market and remain free from any conflicts of interest. The evaluation process will assign 40% weightage to roles and responsibilities, while meeting effectiveness and governance will each account for 30%.

In addition to external evaluations, MIIs must conduct annual internal assessments of their performance and that of their statutory committees. These internal reports should be submitted to the Governing Board within three months after the financial year's end. This dual approach ensures a comprehensive review of MII operations.

Implementation Timeline

Sebi has outlined that the initial external evaluation will focus on the fiscal year 2024-2025. Subsequent evaluations will occur every three years. MIIs are instructed to implement necessary changes to comply with these guidelines and inform market participants about these new requirements.

The introduction of these guidelines is part of Sebi's broader effort to improve governance within MIIs. By mandating regular evaluations by independent agencies, Sebi aims to foster a culture of accountability and transparency in the financial markets.

This structured approach not only aligns with global best practices but also strengthens investor confidence in the integrity of market infrastructure institutions. Through these measures, Sebi seeks to ensure that MIIs operate efficiently and uphold high standards of governance.