SEBI Proposes Easing Board Eligibility Rules for Indian Stock Exchanges

The Securities and Exchange Board of India (SEBI) has proposed relaxing board eligibility rules for market infrastructure institutions (MIIs) to increase the pool of available talent and address recruitment challenges. This regulatory shift allows directors from widely held companies to serve on the boards of stock exchanges, clearing corporations, and depositories, even if other entities within their corporate group operate as market intermediaries.

Defining 'Widely Held' Status

Under the proposed framework, a company qualifies as widely held if no private shareholder, either individually or acting with related parties, owns or controls 10% or more of the equity. Public-sector shareholders are excluded from this 10% threshold calculation. By relaxing these constraints, SEBI intends to remove potential conflicts of interest that previously disqualified experienced professionals from serving on MII boards.

Standardizing Key Management Roles

SEBI has introduced a new Standard Operating Procedure (SOP) for four management positions: Chief Technology Officer, Chief Information Security Officer, Compliance Officer, and Chief Risk Officer. The regulator proposed that vacancies in these roles must be filled within three months.

To ensure operational continuity, the regulator is seeking stakeholder feedback on whether to permit the appointment of deputies for these roles. This would allow institutions to maintain governance standards during leadership transitions.

What Is at Stake

These proposals aim to modernize the governance of India's financial infrastructure. By easing restrictions, SEBI hopes to attract a wider range of expertise to the boards of institutions that underpin the country's capital markets.

Stakeholders have until September 30, 2026, to submit their comments on the proposed regulatory changes before the regulator moves toward final implementation.