Sebi brass feels delay inevitable

FSLRC recommendations controversial, so decision will take time, feel observers

The Securities and Exchange Board of India (Sebi) believes it is unlikely to get the extra powers it has been pressing for quite some time, in the near future.

Some of the powers sought coincide with recommendations in the recent Financial Sector and Legislative Reforms Commission (FSLRC) report. “My feeling is now that the FSLRC report has come, the government and Parliament will perhaps try to combine everything and take one major decision, rather than taking a decision on our own recommendation,” said a top Sebi official.

B N Srikrishna, chairman of the FSLRC, has noted the opposition from various quarters to his own recommendations, and also suggested Sebi could be given some of the powers sought while groundwork for a larger decision is taken.

Some of the amendments sought by Sebi in the Act defining its powers include the authority to impose and recover monetary penalties, to attach properties without recourse to a court, power to pass disgorgement orders and establishment of special courts to deal with criminal prosecution for violation of securities law.

Since 2009, the market watchdog has been recommending these to the government. However, as the FSLRC was set up to review all financial sector laws, Sebi's demands were kept in abeyance.

In February, Sebi's hopes were revived when the finance minister’s Budget speech said, “A proposal to amend the Sebi Act to strengthen the regulator is under consideration.” However, nothing more has been said on this score.

Former regulatory officials and lawyers feel the Sebi Act amendments should not wait till implementation of the FSLRC proposals, which could take a long time.

M S Sahoo, secretary of the Institute of Company Secretaries of India, and a former full-time member of Sebi, believes some of the amendments sought are important and should be done right away, even by resorting to an ordinance. “The immediate concerns of investors can't wait till implementation of the Indian Finance Code, a very long-term project,” he said.

Sandeep Parekh, founder of Finsec Law Advisors, feels implementation of the “overwhelming changes” proposed by FSLRC in the near future is low. “Given the kind of time the Companies Bill has taken, despite wide agreement to adopt it, the chances of the report being accepted with the wide disagreement is quite low. Therefore, the Sebi Act amendments should not be held hostage to that adoption,” he said.

LONG WAIT

• 2009: Sebi requests govt to make amendments to Sebi Act
• 2011: Govt constitutes FSLRC to rewrite financial sector laws
  The government asks Sebi to pursue only critical amendments that can’t wait till securities laws amendments are made through FSLRC
• 2012: Sebi writes to the government to make suitable amendments stating difficulties while cracking down on CIS
• 2013: FM in Budget speech proposes to strengthen Sebi Act
  FSLRC report is made public