SEBI Proposes Framework for Index Providers To Strengthen Transparency

Moneylife Digital Team 29 December 2022

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

Under the new framework, index-providers offering indices for use in India need to be registered with SEBI and take authorisation for introducing such indexes. However, this mandatory requirement will exclude administrators providing benchmarks notified by the Reserve Bank of India (RBI). Secondly, the index-provider must have a minimum net worth of Rs25 crore and a minimum of five years of experience in index administration.

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

SEBI says 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. Independent external auditors will assess the index-providers to evaluate adherence to principles once in two 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 says in a release.

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