‘No major shakeup in exchange governance rules’: Experts

MUMBAI:  The recent announcement by the Securities and Exchange Board of India (Sebi) for tightening governance in stock exchanges, depositories and clearing corporations are welcome changes but are largely incremental in nature, experts told TNIE.

The capital market regulator on Tuesday announced a raft of measures after its board meeting in Mumbai. One of its recommendations said that Market Infrastructure Institutions (stock exchanges, depositories and clearing corporations) functions will now be categorised into three verticals. The first would be critical operations. Second is the regulatory, compliance and risk management functions and the third is other functions.

Experts say that these steps will boost investors’ confidence in these institutions, strengthen the MIIs and bring more clarity and sharpness to the daily functioning of these institutions. “The Board has recognised correctly that the first two functions have to be provided with higher resource allocation. The fact that institutions like stock exchanges always had a dual role previously has been well understood and now with this categorical segregation will over time strengthen these important institutions even further,” said Yash J Ashar, Partner, Head- Capital Markets, Cyril Amarchand Mangaldas.

The Board of SEBI has also recommended that additional items such as board minutes of such entities relating to regulatory, compliance and risk management need to be disclosed on their website “Among other changes for such entities, SEBI has also indicated that the code of conduct be made sharper. Overall, these changes are welcome and are expected to bring transparency and accountability from a market perspective,” said Ashar.

ALSO READ | Sebi tweaks buyback rules of companies

Experts, however, say there is a need to enforce existing regulations effectively. “These are incremental changes. The key is to have better enforcement,” said Sandeep Parekh, founder of Finsec Law Advisors, a financial sector law firm based in Mumbai.

ALSO READ | Sebi to phase out buyback via exchanges

The Sebi board has approved most of the recommendations made by the G Mahalingam committee on improving governance standards at market infrastructure institutions. “The first set of reforms relates to MII (code for stock exchanges, clearing corporations and depositories). These are based on the recommendations of the Mahalingam Committee report and can’t really be faulted. But they are incremental in nature,” added Parekh. He said Sebi has stated that MIIs should give higher priority to operations and regulatory work compared to business development.