SEBI Tightens MII KMP Hiring & Exit Rules – 3-Tier Process

Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2025/75; Dated: 26.05.2025

1. Regulatory Context

On 26 May 2025, SEBI issued Circular SEBI/HO/MRD/MRD-PoD-3/P/CIR/2025/75 prescribing a uniform, three-tier framework for the appointment, re-appointment, termination, or acceptance of resignation of certain Key Managerial Personnel (KMPs) in Market Infrastructure Institutions (MIIs) such as stock exchanges, clearing corporations and depositories. The same circular also tweaks the re-appointment rules for Public Interest Directors (PIDs) and introduces a flexible cooling-off regime.

2. Revised Appointment Workflow

1. Independent External Agency (IEA) – MII engages an IEA to identify and vet suitable candidates.
2. Nomination & Remuneration Committee (NRC) – Evaluates the IEA’s panel, interacts with management, and forwards its recommendation.
3. Governing Board – Takes the final call on appointing the KMP.

This three-step model must be followed for every fresh appointment made on or after the circular’s effective date.

3. Cooling-off Period for Moving to a Competing MII

The mandatory one-year bar in the SECC/D&P Regulations has been replaced with a board-determined cooling-off period for KMPs (including the MD) who wish to join a competing MII. Each MII must lay down its own policy and publish it.

4. Re-appointment of Public Interest Directors (PIDs)

If an MII’s Governing Board decides not to re-appoint a PID for a second term, it must record a detailed rationale and inform SEBI. This aims to bolster transparency and guard against arbitrary board decisions.

5. Practical Implications for MIIs

• Stronger governance lens – External short-listing and NRC vetting reduce in-house bias.
• Talent pipeline planning – Engaging an IEA early will shorten hiring cycles when key posts fall vacant.
• Greater accountability – Documented board justifications for PID changes will face regulatory scrutiny.
• Competitive mobility – Flexible cooling-off allows boards to balance talent movement with confidentiality risks.

MIIs should begin mapping current KMP contracts and PID terms against the new framework to ensure seamless transition by late August 2025 (90-day window).

Click Here To Read The Full Circular