SEBI proposes comprehensive framework to govern index providers

SEBI can also penalise index providers for non-compliance with the proposed norms, and for incorrect disclosures.

FPJ Web DeskUpdated: Thursday, December 29, 2022, 10:02 PM IST
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India's market regulator Securities and Exchange Board of India has release a public consultation document for a framework to enure accountability from index providers. As of now, India's domestic indices such including Nifty50 and Sensex, a joint venture between BSE and S&P Dow Jones. SEBI's paper shows that index providers get to be discreet about changes in their methods for constructing indexes, which leads to exclusion or inclusion of stocks in the index, affecting the returns of index funds and the volume.

Such lack of transparency creates room for conflict of interest, which can be prevented if index providers are regulated by a comprehensive framework. SEBI doesn't specify the guidelines, But it proposes making it mandatory for index providers to adhere to the overarching principles of International Organization of Securities Commissions.

SEBI's paper also proposes a minimum net worth of Rs 25 crore with a 5-year track record. SEBI can also penalise index providers for non-compliance with the proposed norms, and for incorrect disclosures.

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