SEBI introduces framework to monitor shareholding of Market Infra Institutions
SEBI recently introduced a framework to monitor shareholding limits, public shareholding requirements, and the "fit & proper" criteria for Market Infrastructure Institutions (MIIs), which include stock exchanges, clearing corporations, and depositories. This framework applies to both listed and unlisted MIIs, requiring them to disclose their shareholding patterns quarterly on their websites as per SEBI's Listing Obligations (LODR) norms. Every MII shall appoint a depository as “Designated Depository (DD)” for the purpose of monitoring of their shareholding limits as per (Stock Exchanges and Clearing Corporations) Regulations, 2018 and D&P Regulations, 2018, as applicable. The DD will monitor breaches of the threshold limit of 5 percent or 15 percent as applicable under SECC Regulations, 2018 and D&P Regulations 2018, respectively, and take necessary actions. SEBI asked stock exchanges to ensure that Trading Members (TMs), their associates, and agents do not collectively hold more than 49 percent equity. Holdings exceeding 45 per require prior approval for further purchases.
All shareholders with 2 percent or more equity must meet the fit & proper criteria, with MIIs notifying shareholders and reporting non-compliance to Sebi quarterly. In case of breaches, the DD will freeze excess shares, disable voting rights, and transfer dividends from excess holdings to Investor Protection Funds (IPF) or Settlement Guarantee Funds (SGF). The divestment of any excess shareholding in a listed MII beyond the specified limit would be through a special window provided by the stock exchange where the shares of MII are listed. However, any excess shareholding in an unlisted MII will be divested as per the directions given by SEBI on case to case basis.
The framework will come into effect on January 12, 2025, 90 days after the circular's issuance.
