Corporate governance is an area of concern not only at companies in general, but with capital market intermediaries as well.
Securities and Exchange Board of India (SEBI) has recently announced a slew of amendments to SEBI (Depositories and Participants) Regulations.
Such list of amendments include:
1) Non-independent director: Introduction of New definition of “non-independent director” which means a director elected or nominated by the shareholders who are neither depository participants nor their associates and agents. This provides a clarity as to who cannot be appointed as independent directors and ensures appropriate persons are appointed as independent directors to act as watchdog to monitor legal, business and economic affairs of the depository are concluded in compliance with applicable laws and regulations.
2) Definition of Key Managerial Personnel (KMP) has been revised to include:
a) reporting officials of KMP
b) any person defined as KMP under the Companies Act 2013, etc.
Since a KMP is responsible for the management and administration of business and economic affairs of a company, this key revision to KMP definition will bring in some more crucial designators (such reporting officials etc.,) within the scope of KMP making them more accountable and responsible for their acts.
3) Another interesting development is with respect to qualification of members of governing board of depository. Persons (especially at least one public interest director) with experience in the following fields must be included in the board of directors:
a) Legal, compliance and regulatory
b) Business Management and administration
c) Risk Management
d) Finance and accountancy
e) Technology
f) Capital market
However, there is no restriction on including persons with other qualifications and expertise into board of directors to the extent there is no compromise on inclusion of persons with mandatory required qualifications and expertise.
This is a much needed crucial change to ensure right combination of persons with required expertise and qualifications are part of governing body who are well aware of functioning of capital markets to ensure appropriate decisions are taken by board to ensure business and economic interests of all stake holders is appropriately secured.
4) A code of conduct for depositories and participants is prescribed by SEBI. This is crucial to make depositories and participants understand the importance of ethics, transparency and accountability in capital market transactions and to ensure that they adhere to high standards of ethics, transparency and accountability.
