SEBI proposes framework for index providers to strengthen transparency

Dec 28, 2022

Synopsis
​​An index provider must constitute an oversight committee for reviewing the existing index design. The committee must also review the index methodology to ensure it reflects the nomenclature and description of the index.​

The Securities and Exchange Board of India (SEBI) has issued a regulatory framework for index providers to strengthen transparency and accountability on administration benchmark indices.

Under the new framework, index providers offering indices for use in India need to be registered with Sebi and take authorization for introduction of such indices. However, administrators providing benchmarks notified by the Reserve Bank of India will be excluded from this mandatory requirement. Secondly, index provider must have a minimum net worth of Rs 25 crore and must have minimum 5 years of experience in index administration.

An index provider must constitute an oversight committee for reviewing the existing index design. The committee must also review the index methodology to ensure it reflects the nomenclature and description of the index.

OTHER PROTOCOLS
Index providers must conduct due diligence on those submitting data for indices, and a code of conduct for data submitters covering quality, oversight, conflict of interest, and record-keeping, SEBI said.

The index providers will be assessed by independent external auditors to evaluate adherence to principles once in 2 years.

“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,” the regulator said in a release.

[The Economic Times]