SEBI's Circular on Finfluencers: Impact on Registered Intermediaries

SEBI Tightens Oversight: MIIs to Undergo Mandatory Performance Reviews

In a move aimed at deepening governance and transparency in India’s financial markets, the Securities and Exchange Board of India (SEBI) has introduced a structured performance evaluation framework for Market Infrastructure Institutions (MIIs)—including stock exchanges and clearing corporations. The new regime, effective from FY2024-25, calls for both internal and external assessments, with a particular emphasis on the functioning of statutory committees.

A Closer Look at the External Audit Mandate

Starting next financial year, all MIIs will be required to subject their statutory committees to external evaluation once every three years. The first such evaluation must be conducted during FY2024-25, with the final report submitted by September 30, 2025. These reports are to be shared with both the MII’s governing board and SEBI.

The mandate is part of a broader regulatory shift aimed at ensuring that MIIs—given their pivotal role in India’s capital market infrastructure—are held to higher standards of accountability and performance oversight.

Which Committees Are Under the Scanner?

The evaluation covers the MIIs’ statutory committees, which typically include:

Nomination and Remuneration Committee
Standing Committee on Technology
Risk Management Committee
Investment Committee

These bodies are central to the governance and functioning of MIIs. As such, SEBI is keen to ensure that their operations are not only compliant on paper but effective in practice.

How Will the External Evaluation Be Structured?

SEBI’s circular, issued on January 30, outlines a clearly defined framework for these evaluations. The assessments will be based on three key parameters, each with assigned weightage:

Roles, Responsibilities, and Duties of Committees – 40%
Effectiveness of Committee Meetings – 30%
Governance Aspects – 30%

These are not mere checkboxes. Each of the parameters includes multiple sub-criteria, and the evaluation will involve a mix of quantitative and qualitative KPIs (Key Performance Indicators). These performance indicators have been framed in consultation with the Industry Standards Forum (ISF) of MIIs to ensure consistency and relevance across the board.

Internal Reviews: Still the Institution’s Responsibility

External audits aside, SEBI also expects MIIs to conduct annual internal evaluations of their committees and overall institutional performance. These internal assessments must follow a structured format and are to be presented to the respective governing boards within three months of the fiscal year-end—starting FY25.

Importantly, each MII is required to develop its own internal evaluation criteria in line with SEBI’s overarching principles, ensuring that there is a degree of customisation while maintaining regulatory uniformity.

Why This Matters

This two-tiered evaluation system—one internal, the other external—is not just a compliance exercise. It signals SEBI’s intent to instill greater rigor, discipline, and independence in how MIIs govern themselves.

Stock exchanges and clearing corporations form the backbone of India’s market infrastructure, and SEBI’s new rules are designed to ensure these entities do not operate in silos or fall into governance complacency.

The expectation is that these periodic evaluations will serve as a course-correction tool, helping MIIs identify gaps, fine-tune operational procedures, and uphold the standards expected of systemically important institutions.

Final Thoughts

SEBI’s latest directive marks yet another step in its ongoing campaign to bolster trust in the capital markets. By embedding both internal discipline and external scrutiny into the governance of MIIs, the regulator is seeking to ensure that market infrastructure remains robust, responsive, and accountable—not just in times of crisis, but as a matter of daily operational standard.