India's SEBI Proposes Easing Board Eligibility Rules for Market Institutions

India’s Securities and Exchange Board (SEBI) on Wednesday proposed relaxing the eligibility criteria for individuals serving on the boards of stock exchanges, clearing corporations, and depositories. The regulator cited difficulties in finding qualified candidates under the current restrictive framework.

The Proposed Changes

Current regulations broadly prevent individuals connected to stock brokers or other market intermediaries from taking board positions at key market infrastructure institutions. SEBI noted that these rules can disqualify suitable candidates even when their connection to an intermediary is indirect, particularly within large, diversified business groups with independently run subsidiaries.

To address this, the regulator has proposed permitting directors of "widely held companies" to serve on these boards. This would apply even if another company within the same corporate group operates as a broker, clearing member, or depository participant.

Defining 'Widely Held'

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SEBI provided a specific definition for what would constitute a widely held company under the proposal. The key criteria include:

• No single private shareholder, either individually or together with related parties, can own or control 10% or more of the company.
• This ownership threshold would not apply to public-sector shareholders.

The regulator stated that this change is intended to attract a larger pool of experienced professionals to govern the country's critical market institutions, potentially enhancing their corporate governance and strategic oversight.