SEBI proposes rules for index providers

The markets regulator said the index provider shall be a legal entity incorporated under Companies Act in the country of origin and should have a minimum net worth of Rs 25 crore.

The index provider will have to constitute an oversight committee for reviewing existing index design. The committee will also review any proposed changes to benchmark methodology.  The regulations said the index provider must have policies and procedures to manage conflicts of interest and to protect the integrity and independence of various functions performed in connection with determination of indices.

In case an index provider is engaged in any other activity, the activity of index provider in general and the benchmark determination process in particular must be completely ring-fenced to prevent sharing or leakage of any sensitive information, Sebi said. Index provider must document and make available publicly, the methodology for index calculation. The index providers must be assessed by independent external auditors to evaluate adherence to International Organization of Securities Commissions (IOSCO) principles once in two years, as per the proposed regulations.