SEBI proposes framework for ‘significant indicators’ to improve governance on index providers

Markets regulator Sebi on Monday proposed a regulatory framework for ‘significant indices’ as part of its effort to improve governance of index providers in the securities market.

In its consultation paper, SEBI said index provider-managed and Rs. Defined as “key indicators” benchmarked by domestic mutual fund schemes with cumulative assets under management (AUM) of over Rs 20,000 crore.

The threshold should be calculated on the basis of the daily average AUM of each domestic mutual fund scheme in the last six months ending 30 June and 31 December every year.

To calculate the AUM, if the mutual fund scheme tracks multiple indices, the AUM is divided proportionately. For “Index of Indices”, the AUM of the underlying indices is included based on their relative weightage.

The proposal, if implemented, aims to increase transparency and accountability in financial benchmarks.

SEBI has suggested that providers of identified significant indices shall submit applications for registration as index providers within six months from the date of issue of the circular. This requirement will not apply to providers if all their significant indices are regulated by the Reserve Bank of India (RBI).

Further, the grievance redressal mechanism will be applicable only to significant indices provided by index providers registered with SEBI.

The Securities and Exchange Board of India (SEBI) has invited public comments on the proposal till January 30.