Sebi Enforces Cooling-Off Rule for Directors at MIIs

07 May 2025 CW Team

Markets regulator Sebi has tightened governance norms for market infrastructure institutions (MIIs)—including stock exchanges, clearing corporations, and depositories—by introducing a mandatory cooling-off period for directors before they can move to a competing entity.

The new rules are part of amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, and the Depositories and Participants Regulations, 2018, as per Sebi notifications dated April 30.

Under the revised framework, non-independent directors serving on the board of an MII will need to observe a cooling-off period, as determined by the board of the concerned institution, and obtain Sebi’s prior approval before joining a competing MII. This aims to prevent potential conflicts of interest and ensure market neutrality.

Sebi added that public interest directors can be reappointed to another MII, such as a stock exchange, clearing corporation, or depository, for a fresh three-year term only after regulator approval. However, the cooling-off requirement will apply specifically when such appointments involve competing entities.

These changes follow Sebi's March review of the appointment process for senior personnel at MIIs and are aimed at reinforcing market transparency and institutional integrity through stricter transition norms.

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