Overhaul of Sebi panels on the cards to accommodate govt nominees

The Securities and Exchange Board of India (Sebi) is overhauling its key panels to give representation to senior government officers as ex-officio members. The move is aimed at improving the coordination between the government and the regulator. 

Sebi had last month restructured its primary market advisory panel and appointed senior officials from the finance ministry and the Ministry of Corporate Affairs in an ex-officio capacity. The panel is significant, as it advises Sebi on legal framework related to the primary market. 

Other panels, which will soon see government nominees, are the secondary market advisory committee, including ones on the development of corporate bonds, fair market conduct (which handles insider trading rules and surveillance on the markets), and one on mutual funds. 

At present, very few Sebi committees have finance ministry nominees. Those which have representation include the alternative investment policy advisory committee looking at issues related to the development of alternative investment and the start-up ecosystem. 

“This has been the finance ministry proposal where it had sought a list of committees of the capital market earlier this year to understand the functionality of each panel. These panels are responsible for taking key decisions which directly impact not just the equities market but the entire financial ecosystem and the economy,” said a source in the know.  According to him, the market regulator has the prerogative to restructure the panels, as and when it requires. This will expedite the decision-making and enhance the functionality. 

However, experts’ views are divided. “The government nominee on the expert panel is not required when the Sebi board already has government representation,” said a former Sebi official, adding this could hurt the independence of the regulator and possibly influence any decision that may arise. 

While another expert says it has its positives, an ex-officio member on these panels may have viewpoints and help expedite matters to the board. 

The issue of autonomy of the market regulator surfaced recently when the finance ministry had proposed transferring the regulator reserve fund to the consolidated fund of India. This has been done without consulting the regulator, limiting Sebi’s flexibility to calibrate the imposition of fees it levies on market intermediaries. 

Sebi recently sought discontinuation of the Reserve Bank of India’s representation on the former’s board or alternatively also wanted its representation on the central bank’s board. 

“The autonomy of any such regulator is crucial, as this sends out a message to global investors who want to make investments in India. Such representation would be seen as intervention by the government and may not benefit the institutional efficiency and also slow down the decision-making,” said another market expert.