Markets regulation: Sebi proposes ‘Significant Indices’ framework; aims to tighten governance of index providers

The Securities and Exchange Board of India on Monday floated a proposal to introduce a regulatory framework for ‘Significant Indices’, a move aimed at strengthening governance standards and improving transparency among index providers in the securities market, PTI reported.In a consultation paper, Sebi defined ‘Significant Indices’ as those administered by an index provider and used as benchmarks by domestic mutual fund schemes with a cumulative assets under management (AUM) of more than Rs 20,000 crore. The threshold would be determined based on the daily average AUM of such schemes over the preceding six months, ending June 30 and December 31 each year.The regulator said that where a mutual fund scheme tracks more than one index, the scheme’s AUM would be apportioned proportionately across the relevant indices. In the case of an “index of indices”, the AUM of the underlying indices would be factored in according to their respective weights.Sebi said the proposed framework is intended to enhance transparency, accountability and robustness in the governance of financial benchmarks that play a critical role in the capital markets ecosystem.Under the proposal, providers of identified Significant Indices would be required to apply for registration as index providers within six months of the issuance of a Sebi circular. However, this requirement would not apply to index providers whose significant indices are already regulated by the Reserve Bank of India.The market regulator further proposed that the grievance redressal mechanism would apply only to Significant Indices offered by index providers registered with Sebi.Sebi has invited public comments on the consultation paper till January 30, after which it will take a final view on the proposed framework.