Sebi plans to cut red tape for market entities

Market regulator the Securities and Exchange of India (Sebi) plans to cut red tapism by doing away with unnecessary regulations, such as need for its prior approval before market entities can change their top management or legal status.

The market entities to benefit from this step would include stock brokers, merchant bankers, credit rating agencies, debenture trustees, registrars and share transfer agents, underwrites and bankers to an issue.

Currently, these entities are required to seek a prior approval from Sebi for any change in their 'status or constitution'.

Such changes in status include change in control, amalgamation, demerger, consolidation or any other corporate restructuring exercise, as also change in legal status of the market intermediary.

The changes in constitution that require Sebi's prior approval include change in managing director or whole-time directors, proprietor, partners etc.

As per the proposed revision of its regulations, Sebi wants the market entities to seek its prior approval, only in the case of a change in control for which the intermediary has a knowledge, a senior official said.

For other changes, the market entities would need to inform Sebi in their various periodical filings.

A proposal to do away with these regulations was discussed at the Sebi's last board meeting and the necessary amendments to bring about the proposed change in norms could be notified soon, he added.

The official said that Sebi has been receiving more than 100 requests per month from various market entities seeking regulator's prior approval for changes in their status or constitution.

Although, a big majority of these requests relate to very small and even insignificant changes, the market entities are obliged to do so for complying with the regulations.

Given the sharp increase in the number of market intermediaries and the volume of requests, the regulator has found processing of these applications quite time consuming.

At the beginning of the current fiscal, there were more than 8,800 stock brokers, close to 75,400 sub-brokers, 164 merchant bankers, 74 registrars and share transfer agents, 48 bankers to an issue and 30 debenture trustees.

Besides, Sebi observed that a number of entities, such as those from the public sector where senior-level appointments are decided by the government or their parent banks, find it difficult to seek prior approval for such changes.

Therefore, Sebi found it desirable that the time spent on processing these requests be utilised for working towards growth and oversight of the market, addressing investors' complaints and other policy related issues.