The committee on model rules and bye-laws for stock exchanges has recommended that the president of the exchanges, redesignated as the chairman, should deal with all matters related to administration, functions and affairs of the exchange only at the meeting of the governing board and should not deal with any operational matters.

The panel's proposal follows the involvement of presidents (normally a nominee of brokers) in the daily affairs of the exchange. SEBI had earlier this year sacked the president of the Bombay Stock Exchange for serious lapses in the functioning of the BSE.

The powers concerning administration should be vested with the executive director (ED) who shouldbe the sole deciding authority in these matters, said panel chairman MR Mayya, adding that the group had laid down the various functions of the ED. The ED would be selected by a committee comprising a member of the exchange, a SEBI nominee and three outside experts.

The committee also suggested creation of the post of deputy ED at exchanges who would officiate in the absence of the ED. However, if an exchange cannot afford the creation of this additional post, it may seek exemption from the regulator. It also recommended that the post of honorary treasurer should be dispensed with as his functions are being discharged by the secretariat of the exchange.

With a view to globalising the Indian stock markets, it suggested the deletion of existing guidelines that prohibit a non-citizen of India from being on the governing board. It also recommended that no person should be a member of the board after 75 years of age.

The power of the general body should be restricted to acquisition, purchase, sale, exchangeor otherwise dispose of any unmovable property of value greater than Rs 50 lakh or such amount as authorised by it, borrowings, pledge and mortgage of property, contribution to charitable organisations an amount upto five lakhs or any such amount as authorised, Mayya stated.

With regard to selection of new members, the group recommended that a selection committee be constituted with 60 per cent of non-members of the exchange, Mayya said, adding that the governing board should normally approve the candidates so selected and in case of rejection, the reasons should be recorded in writing.

The committee also suggested that there should be an audit committee to oversee operations of the exchange in terms of adequacy of system with a view to improve corporate governance of the exchange, the selection committee, selection of EDs and deputy EDs, heads of various departments and investor services committee.

The panel has suggested that a broker who is declared a defaulter on the exchange should not be allowedreadmission for a period of five years.

The panel mooted this proposal as existing regulations allow readmission of a defaulter after he pays the outstanding dues, including those due to his clients. ``The defaulting broker should also be prohibited from being a member of any other exchange for a period of five years,'' Mayya said.

The committee has also recommended that a member of an exchange with multiple membership in other exchanges should also be declared a defaulter ipso facto. It suggested that the assets of the defaulter be distributed in a manner that gives priority to the claims of the exchange, the clearing house or clearing corporation, settlement guarantee fund, SEBI, depository and claims arising out of contracts including those entered into with clients as well as those liabilities as determined by any authority recognised by the central and state governments.