Sebi tells public interest directors to treat system failures as financial irregularities

Mumbai: The Securities and Exchange Board of India has asked public interest directors on the boards of market infrastructure institutions (MIIs) to treat system failure as financial irregularity.

"Ensure that as MIIs innovate, there is no compromise on systemic stability or data integrity. Sebi encourages the use of AI and machine learning tools, but with guardrails to protect privacy and security of investor data," Sebi chairman Tuhin Kanta Pandey said. He was speaking at the Public Interest Directors Conclave.

At present, technology framework is given the highest weightage when market infrastructure institutions undergo an independent external evaluation.

Pandey said public interest directors (PIDs) can no longer just be governance experts but must develop an understanding of emerging technologies.

PIDs should exercise their independence when reviewing the adequacy of financial and human resources for functions under vertical 1 (critical operations) and 2 (regulatory, compliance and risk management). Your meetings, separate from management and KMPs (key managerial personnel), should have comprehensive discussions on critical issues concerning the MII," the Sebi chairman said.

"Please use the authority vested in you by Sebi. Bring your independent judgment to the table. Pro-actively bring to Sebi's notice any risk identified by you. Reinforce the checks and balances that strengthen your institution's governance culture," he said.

The regulator urged public interest directors to make sure that their interventions in board meetings are appropriately recorded.