SEBI introduces framework to monitor shareholding of market infra institutions

Markets regulator SEBI on Monday 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, the regulator said in a circular.

Each MII must appoint a non-associated Designated Depository (DD) to monitor compliance with shareholding limits. For depositories, the other depository will act as their DD.

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.

Additionally, "the DD shall monitor and inform the MII and stock exchange on which its shares are listed (in case of listed MII), as and when threshold limit of combined holding of 49 percent of all persons' resident outside India (directly or indirectly, either individually or together with persons acting in concert) in the paid-up equity share capital of an MII is breached and take consequential 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.

Also, SEBI directed clearing corporations to maintain at least 51 percent ownership by stock exchanges, with no exchange holding over 15 percent in multiple CCs.

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 a case-to-case basis.

The framework will come into effect on January 12, 2025, 90 days after the circular's issuance.