Process for appointment, re-appointment, termination or acceptance of resignation of specific KMPs of an MII and Cooling-off period for KMPs of an MII joining a competing MII and provisions relating to re-appointment of PIDs

## Report on SEBI Circular SEBI/HO/MRD/MRDPoD-3/P/CIR/2025/75 **1. Executive Summary:** This report analyzes SEBI Circular SEBI/HO/MRD/MRDPoD-3/P/CIR/2025/75, issued on May 26, 2025. This circular introduces changes concerning the Key Management Personnel (KMPs) of Market Infrastructure Institutions (MIIs). The circular addresses three key areas: the process for appointment, reappointment, termination, or acceptance of resignation of specific KMPs; the cooling-off period for KMPs joining a competing MII; and provisions related to the reappointment of Public Interest Directors (PIDs). The core purpose is to strengthen the governance framework of MIIs by ensuring the stature, independence, and integrity of key personnel. The key changes involve a more structured process for KMP appointments, a framework for cooling-off periods when KMPs move to competing MIIs, and a requirement for documented rationale if a PID is not reappointed. **2. Introduction:** This report aims to provide a comprehensive overview of SEBI Circular SEBI/HO/MRD/MRDPoD-3/P/CIR/2025/75, based solely on the information provided within the circular's text. It outlines the policy's objectives, key changes, impacted stakeholders, and expected outcomes as inferred from the document. **3. Policy Overview:** This circular introduces new regulations and processes. It is *not* an amendment to a specific prior policy mentioned within the provided text itself, though it references existing regulations implicitly. * **Core Objectives:** The primary objectives, as inferred from the text, are: * To enhance the governance framework of MIIs (Stock Exchanges, Clearing Corporations, and Depositories). * To ensure that KMPs in crucial operational areas (compliance, risk management, technology, and information security) possess the appropriate stature and independence. * To prioritize compliance, risk management, technological resilience, and market integrity over commercial considerations within MII operations. **4. Background and Rationale:** This is a new policy addressing perceived gaps in the existing governance structure of MIIs. The likely problem/issue this policy addresses, inferred from the text, is a potential lack of consistent standards and independent oversight in the appointment, management, and movement of key personnel within MIIs. The circular suggests that a more robust and transparent process is needed to safeguard the public interest mandate of these institutions and maintain market integrity. The feedback received from various stakeholders and the recommendations of the Secondary Market Advisory Committee of SEBI (SMAC) further indicate a need for these changes. **5. Key Provisions / Changes:** This circular introduces the following key provisions: * **Appointment of Specific KMPs (CO, CRiO, CTO, CISO):** * MIIs must engage an independent external agency to identify and recommend candidates. * The agency's recommendations are submitted to the Nomination and Remuneration Committee (NRC). * The NRC evaluates the recommendations and submits its recommendations to the Governing Board. * The Governing Board makes the final decision. * **Reappointment, Termination, or Acceptance of Resignation of Specific KMPs (CO, CRiO, CTO, CISO):** * The NRC evaluates these cases and submits recommendations to the Governing Board. * The Governing Board makes the final decision. * KMPs must be given a reasonable opportunity to be heard before termination. * **Cooling-Off Period for KMPs Joining a Competing MII:** * The Governing Board of each MII must prescribe a mechanism for a cooling-off period for KMPs, including the MD, who join a competing MII as a KMP. * The definition of "competing MII" is as explained under SECC Regulations, 2018 and DP Regulations, 2018. * **Reappointment of PIDs:** * If an existing PID is not considered for reappointment after their first term, the Governing Board must record the rationale and inform SEBI. * The cooling-off period for Non-Independent Directors and PIDs shall be as prescribed by the Governing Board of the MII. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders directly affected by this policy are: * Recognized Stock Exchanges * Recognized Clearing Corporations * Depositories (collectively, Market Infrastructure Institutions or MIIs) * Key Management Personnel (KMPs) of MIIs, specifically Compliance Officers (COs), Chief Risk Officers (CRiOs), Chief Technology Officers (CTOs), and Chief Information Security Officers (CISOs) * Public Interest Directors (PIDs) * Nomination and Remuneration Committees (NRC) of MIIs * Independent external agencies engaged for KMP selection * SEBI **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** * SEBI is responsible for overseeing the implementation and enforcement of the circular. * MII Governing Boards are responsible for establishing and implementing the required processes and mechanisms. * The NRC is responsible for evaluating candidates and making recommendations to the Governing Board. * **Timelines:** The provisions of the circular are applicable from the 90th day of its issuance (May 26, 2025). * **Procedures:** MIIs are required to: * Take necessary steps and put in place necessary systems for implementation. * Make necessary amendments to their byelaws, rules, and regulations. * Bring the provisions of the circular to the notice of market participants, including investors, and disseminate the same on their website. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of these changes, based on the text, are: * Improved quality and independence of KMPs in critical operational roles within MIIs. * A more rigorous and transparent process for the appointment, reappointment, termination, and acceptance of resignation of KMPs. * Reduced potential for conflicts of interest and enhanced market integrity due to the cooling-off period requirement. * Increased accountability and transparency in decisions regarding the reappointment of PIDs. * Strengthened overall governance and risk management practices within MIIs, leading to greater investor confidence and a more stable securities market. **9. Conclusion:** SEBI Circular SEBI/HO/MRD/MRDPoD-3/P/CIR/2025/75 represents a significant step towards enhancing the governance framework of Market Infrastructure Institutions. By introducing more stringent requirements for the selection, management, and movement of key personnel, SEBI aims to ensure that MIIs prioritize their public interest mandate and maintain the integrity of the securities market. The circular emphasizes the importance of independent oversight and transparency in decision-making, which are crucial for fostering investor confidence and promoting the development of a robust and reliable financial ecosystem.

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