SEBI Clarifies Compliance Officer Role: What “One Level Below Board” Really Means

Introduction:

On April 1, 2025, SEBI issued an important clarification regarding the position and designation of the Compliance Officer in the organization structure of the listed entity under Regulation 6 of the SEBI (LODR) Regulations, 2015.

This move aims to streamline governance and bring more clarity to listed entities.

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Key Takeaways from the SEBI Circular:

1. Compliance Officer Must Be a KMP

SEBI reiterates that the Compliance Officer must be:

• A Key Managerial Personnel (KMP).
• A whole-time employee of the listed entity.

2. Clarification on “One Level Below Board”

SEBI has clarified that:

• “One level below the Board of Directors” refers to one level below the Managing Director (MD) or Whole-Time Director (WTD) who are part of the Board of Directors.
• This is aligned with Regulation 2(1)(o) of LODR and Section 2(51) of the Companies Act, 2013.

3. Entities Without MD/WTD

In such cases, the Compliance Officer:

• Must not be more than one level below the Manager, CEO, or any other person responsible for heading day-to-day affairs.

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Why This Matters:
This clarification enhances governance by ensuring that the Compliance Officer holds a sufficiently senior role to carry out duties effectively, in line with SEBI’s broader push for improved accountability and transparency in listed entities.

Reference: SEBI Circular – April 1, 2025

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FAQ Section:

Q1: Can a company secretary be a Compliance Officer?
Yes, provided he/ she is not more than one level below the MD/WTD (or equivalent).

Q2: Does this change apply to all listed companies?
Yes, it applies to all listed entities under SEBI (LODR) Regulations, 2015.

Q3: What happens if the entity doesn’t comply with this structure?
Non-compliance could lead to penalties and regulatory action by SEBI.