Panel Wants Issuers Of Capital Brought Within Sebi Ambit

The 18-member S A Dave panel set up to recommend steps for developing infrastructure in the countrys capital market has recommended that issuers of capital (a non-regulated group) should be brought under the purview of the Securities and Exchange Board of India.

According to the draft report of the committees recommendations, the panel has suggested that all matters relating to securities markets regulation be entrusted to a single, visible, credible, statutory and independent organisation which is accountable to Parliament.

The recommendations of the committee are grouped under institutional, legal and informational infrastructure. The committee has recommended as many as 25 amendments in the Companies Act and 14 amendments in the Income Tax Act.

 

It has suggested bringing issuers of capital under the Sebi purview. The capital market watchdog also needs to take civil action to refund monies to investors which were appropriated in violation of regulations, impose fines, and institute criminal proceedings where necessary. Enabling provisions, the report says, also need to be made to allow Sebi to drop civil proceedings if an intermediary agrees to take corrective steps.

The report calls for an introduction of an advanced rulings, advisory opinions and `no action letters.

For speedy resolution of disputes, constitution of a special tribunal the Capital Market Tribunal could be set up primarily for looking into investors grievances, and settling capital market disputes.

An amendment to the Sebi Act could be made if necessary, says the report.

The report calls for doing away with the class of sub-brokers to ensure that investors get contracts of members of stock exchanges only in line with the other countries in the world.

The report also indicates that there is a need for creating a level-playing field as far as lending by banks and financial institutions is concerned.

It takes note of the fact that while a foreign company is able to subscribe to a preferential allotment by borrowing outside India, an Indian promoter is unable to raise loans borrowings due to restrictions by banks.

The report calls for providing flexibility in the manner of raising capital by corporates. It says that besides the introduction of book-building, there is a need for introducing the system of limited offer of securities to qualified institutional buyers.

The report also states that the investment rules for provident and gratuity funds in India have been highly directed and regulated in favour of public sector investment avenues.

They can be liberalised to let them invest in corporate securities like shares and mutual funds.

The legal system relating to the securities market lacks awareness of professional and tort liabilities and of class action suits, minimal availability of high quality legal services, poor availability of public information relating to the capital market regulations and absence of opinions of Sebi and other regulations, the report said.

Daves prescription

Debi be empowered to regulate issuers of capital, take civil action for frauds

Abolition of sub-broker class suggested

Complete exemption for stock exchanges from income tax

Buyback of shares mooted up to 10 per cent equity capital

Linking up of regional bourses into regional grid mooted

Introduce system of limited offer of securities to Qualified institutional Buyers

Allow Provident and Gratuity Funds to invest in corporate securities and mutual funds

Setting up of independent Capital Markerts Tribunal mooted