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The market regulator SEBI has allowed eligible foreign entities including stock exchanges to hold 15 per cent stake in depository participants in India. Earlier, foreign players were allowed to hold 15 per cent in domestic stock exchanges but none of them have scaled up their holdings to that mark so far as India’s exchange space is considered heavily regulated, experts say.
It was expected that SEBI would allow domestic corporate houses to set up depository business but the regulator has restricted their holding to just 5 per cent. Domestic eligible institutions such as banks and insurance companies can hold 15 per cent in a depository.
SEBI has further prescribed that managing directors at stock exchanges, depositories and clearing corporations can have a maximum of two terms of five years each. The move comes after the board of SEBI in June approved changes to regulations governing Market Infrastructure Institutions (MIIs) wherein the first term in stock exchanges, depositories and clearing corporations may be extendable by another term, subject to satisfactory performance review.
Age limit
“Appointment of MDs shall be for a term not exceeding five years. Provided that post the completion of first term as MD, the depository shall conduct the appointment process afresh.” A person may be appointed as MD by the depository or a recognised stock exchange or recognised clearing corporation for a maximum of two terms not exceeding five years each subject to a maximum age limit of 65 years”, SEBI said.
Besides, SEBI has said that a cooling-off period of one year should be applicable prior to nomination as a public interest director (PID) in another MII. It should be three years for a director to become a shareholder director in the same institution or a director in its subsidiary.
“A person shall be nominated as a public interest director for a maximum of three terms across a depository/a recognised stock exchange/ a recognised clearing corporation, subject to a maximum age limit of 75 years,” SEBI said.
Compensation
SEBI also modified the definition and norms relating to disclosure of the compensation of the key management personnel. The definition has been modified to include, any person who directly reports to the CEO or director of the governing board of the MII or any person up to two levels below MD or CEO. The regulator directed MIIs to disclose the ratio of compensation paid to them vis-a-vis median of compensation paid to all their employees.
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