Revamp of India's Securities Legislation
The Indian government is set to overhaul its securities legislation by unifying three existing laws into the Securities Markets Code (SMC). This has raised concerns regarding funding challenges for the Securities and Exchange Board of India (Sebi).
Key Features of the Proposed Securities Markets Code
- Simplification of norms and the establishment of strict timelines for investigations by Sebi.
- Introduction of a reserve fund to manage Sebi's expenditures, with 25% of the annual surplus from the General Fund credited to this reserve.
- The reserve fund is capped at the total annual expenditure of the preceding two financial years.
- Any remaining surplus after contributing to the reserve fund is to be transferred to the Consolidated Fund of India.
Funding and Operational Challenges for Sebi
- Sebi cannot withdraw funds from the Consolidated Fund of India, similar to the Reserve Bank of India (RBI).
- The surplus available to Sebi is estimated at ₹3,000-4,000 crore, which is crucial for its expansion and technological investments.
- Constraints posed by the reserve fund may affect Sebi's ability to meet prescribed timelines for investigations and procure necessary technology.
- Sebi aims to establish local offices in several Indian cities as part of its expansion efforts.
Ombudsperson Framework and Grievance Redressal
- The new code mandates an ombudsperson framework, a shift from RBI and IRDAI's approach.
- Sebi's existing platforms for grievance redressal include the Sebi Complaints Redress System (SCORES) and an Online Dispute Resolution mechanism.
- The Ombudsperson will intervene only after the regular grievance redressal process fails within 180 days.
- Concerns exist regarding potential burdens on the Securities Appellate Tribunal (SAT) due to the Ombudsperson's involvement.
Overall, while the introduction of the SMC aims to streamline regulations, it may impose significant financial and operational demands on Sebi, necessitating careful consideration of its funding mechanisms and grievance resolution processes.
