SEBI Chief Urges Stronger Ethical Oversight from Public Interest Directors

SEBI Chairperson Tuhin Kanta Pandey, addressing the 2025 Public Interest Directors (PID) Conclave on Wednesday, underscored the crucial role of PIDs in upholding the public interest within the governance frameworks of Market Infrastructure Institutions (MIIs).

Public Interest Must Be at the Core of MII Governance

Pandey stressed that the "public interest" perspective must remain at the forefront of all strategic and operational decisions made by MII governing boards. He called on PIDs to ensure that their interventions during board deliberations are not only thoughtful but also properly documented in meeting records.

Describing public interest directors as the "custodians of trust" in the MII ecosystem, the SEBI chief made it clear that their responsibilities go far beyond regulatory compliance. “Your role is fiduciary, moral, and institutional—you are not here merely to satisfy a regulatory checkbox,” he asserted.

He urged directors to act with independence, particularly when evaluating the adequacy of financial and human resources allocated to critical verticals. As per SEBI’s regulatory structure, Vertical 1 encompasses core operations, while Vertical 2 includes compliance, regulatory oversight, risk management, and investor grievance redressal.

To preserve objectivity, Pandey advised PIDs to convene exclusive meetings—without management or key managerial personnel to address significant governance and operational matters in a candid and independent manner.

SEBI Reforms to Empower Public Interest Directors

Highlighting the importance of independent oversight, Pandey encouraged PIDs to bring a fresh, unbiased lens to boardroom discussions and to proactively flag emerging risks. “You must reinforce the institutional checks and balances that foster a robust governance culture,” he said.

With India’s capital markets expanding rapidly, the responsibilities of PIDs are set to grow more complex. Pandey cautioned that striking the right balance between shareholder interests and the institution’s non-negotiable public purpose will require unwavering commitment. “Ethical governance must become part of your institution’s DNA,” he noted.

The SEBI chair also emphasised the importance of building resilient internal systems. He advised PIDs to ensure the implementation of strong internal controls, clear Standard Operating Procedures (SOPs), and comprehensive documentation to effectively manage technology-related risks. These safeguards, he suggested, could be developed in collaboration with the Industry Standards Forum to promote consistency across MIIs.

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On the regulatory front, Pandey highlighted SEBI’s recent initiatives aimed at strengthening the role of PIDs. These include streamlining appointment processes and removing the mandatory cooling-off period for directors moving between competing MIIs, now leaving that decision to the discretion of individual institutions.

Furthermore, SEBI has introduced skill-based evaluation metrics to guide the selection and reappointment of PIDs, ensuring that those appointed are both qualified and aligned with the institution’s evolving needs.

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