Sebi Issues Regulatory Framework For Index Providers

The framework is to strengthen the transparency and accountability in governance and administration of the financial benchmark indices in the Indian securities market

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The market regulator Securities and Exchange Board of India (SEBI), on Wednesday, has issued an elaborate regulatory framework for index providers, both domestic and foreign, in order to strengthen the transparency and accountability in governance and administration of the financial benchmark indices in the Indian securities market, according to a PTI report.

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In a consultation paper released on December 28, Sebi has proposed that the index providers offering indices for use in India have to be registered with Sebi to obtain authorization for introduction of such indices. Also, the index provider must have a minimum net worth of INR 25 crore and minimum 5 years of experience in index administration.

Furthermore, Sebi said that the regulations for index providers should prescribe provisions to ensure inter-alia, eligibility criterion, compliance, disclosures, periodic audits, and penal action in case of non-compliance/ incorrect disclosures. It also noted that the administrators providing benchmarks notified by the Reserve Bank of India will be excluded from this mandatory requirement.

The proposed regulation shall be applicable to index providers (both domestic and foreign) if the users of the index/products based on the index are located in India," said Sebi in an official statement.

"Given the varied functions that an index serves, it is essential that it is reliable, its construction and modification is transparent, its management is subject to adequate governance and accountability mechanisms, etc," it added.

The market regulator also instructed that, "If Sebi determines any adverse findings about the administration of such indices and/ or non-adherence to any of the stated principles, Sebi at its sole discretion will have the right to take appropriate action."