The Securities and Exchange Commission (SEC) has issued a guidance note clarifying its recent directive on director tenure and board appointments, providing much-needed clarity to capital market operators rattled by the original announcement last week.
The guidance, which outlines who is covered under the new rules and how they should be interpreted, reveals that Capital Market Operators (CMOs), specifically those deemed Financial Market Infrastructures (FMIs) and Significant Public Interest Entities (SPIEs), are required to comply.
This clarification comes after the earlier announcement, which left market operators scrambling to interpret the implications, with many fearing the rules could lead to mass exits of long-serving executives and upend board structures across the sector, disrupt business continuity, and impose burdensome compliance requirements.
But in the new guidance note released to stakeholders over the weekend, the rules apply only to CMOs that operate Financial Market Infrastructures (FMIs); entities that provide trading, clearing, settlement, or depository functions and have been designated by the Commission as Significant Public Interest Entities (SPIEs).
A SPIE, as defined by the guidance, is any operator that is systemically important, manages significant investor exposure, or plays a critical infrastructure role in the capital market.
This may include exchanges, clearing houses, and securities depositories. Entities likely to fall under this category include FMDQ Group, NGX Group, CSCS, and NG Clearing.
Importantly, the guidance notes that the rules do not apply to private companies, nor to most CMOs, unless specifically designated as SPIEs by the Commission.
The note further clarified that specific provisions that apply to PLCs will be so indicated
The guidance explicitly notes that:
For affected entities, SPIEs operating as FMIs, the new rules are aimed at reinforcing board independence and governance transparency. They include
These provisions take immediate effect for FMIs designated as SPIEs.
The Commission also urged affected entities to:
Although the rules are limited in scope for now, the SEC is encouraging all capital market operators—especially those aspiring to systemic relevance—to consider adopting these standards.
The guidance emphasizes that sound corporate governance is central to market integrity, investor protection, and long-term resilience.
“Operators seeking to align with international best practice, improve market standing, or prepare for future designation as public interest entities should consider adopting similar tenure and independence safeguards,” SEC noted.
Overall, the Commission may be laying the groundwork for stricter board governance and greater scrutiny over how directors are appointed and rotated.
Overall, the Commission may be laying the groundwork for stricter board governance and greater scrutiny over how directors are appointed and rotated.