Managing Directors Excluded From MIIs’ Audit Panels Under SEBI’s Revised Rules

On Monday, the Securities and Exchange Board of India (SEBI) issued revised norms affecting audit committees of market infrastructure institutions (MIIs), including stock exchanges, depositories, and clearing corporations.

As per the update, Managing Directors (MDs) and other Executive Directors will no longer be members of audit committees but may attend meetings without voting rights with the Chairman’s permission. Key management personnel may also be heard when the auditor’s report is reviewed but cannot vote. SEBI also mandated that all MII functions undergo an internal audit annually. The internal auditor must be an independent firm and report only to the audit committee. These changes follow industry feedback and discussions with SEBI’s Secondary Market Advisory Committee and will come into effect after three months.

The audit committee will continue to handle responsibilities such as approving related party transactions, reviewing financial statements, and assessing risk management systems.