The Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman while presenting the 2021 budget had announced that the Government would consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956, and Government Securities Act, 2007 into a rationalized single Securities Markets Code.
The SEBI Act gives the regulatory body the power towards regulating the capital markets through several regulations while also safeguarding that investor interest is always protected.
The Securities Contracts (Regulation) Act, or SCRA, largely rules the affairs of the stock exchange, which is an important institution in the capital market. The Depositories Act controls the depositories of the nation that hold the securities worth billions of dollars.
The Government Securities Act is legislation that provides the Reserve Bank of India (RBI) the power towards amending the laws that govern the government securities or G-sec market.
The Government would support the development of a world-class Fin-Tech hub at the GIFT-IFSC.
In order to instill confidence among the participants in the Corporate Bond Market during times of stress and in order to generally improve secondary market liquidity, Union Budget 2021-2022 had proposed to make a permanent institutional framework. The proposed unit would buy investment-grade debt securities both in stress as well as in normal times and assist in the development of the Bond Market.
The Finance Minister further detailed that in the Budget 2018-19, the Government had declared its intention towards establishing a system of regulated gold exchanges in the nation. For this purpose, SEBI would be notified as the regulator and Warehousing Development and Regulatory Authority would be strengthened for setting up a commodity market ecosystem arrangement which includes vaulting, assaying, logistics, etc as well as warehousing.
With a purpose to provide protection to the investors, the Finance Minister had recommended introducing an investor charter as a right of all fiscal investors across all fiscal products.
To offer a further boost to the non-conventional energy sector, the Finance Minister had said that the Government would give an additional capital infusion of Rs 1,000 crore to Solar Energy Corporation of India also Rs 1,500 crore towards the Indian Renewable Energy Development Agency.
A common view that has appeared for proposing to merge three important Acts is that a single code would give more operational competence to the regulator that has the duty of regulating several forms of securities like equity, commodity, currency as well as interest rate. Furthermore, it also controls stock exchanges, which gives a trading medium for government and private sector bonds as well.
Henceforth, there was a view that some of the acts that were in place for times could be revoked, and a new more well-organized, and modern framework could be put in place.
The capital markets controller has mainly been looked upon as an effective regulator and while there were a few cases of inordinate delays in investigations, the Indian stock market is taken to be robust with strong settlement as well as surveillance mechanisms.
A common code shall improve the operational competencies in terms of bringing down the turnaround time considering the regulatory approvals. It could even give market intermediaries and the investor community in general better precision in terms of the legalities of some matters as, at times, different Acts can provide a contradictory scenario.
What the government had recommended is basically rationalization of the different laws and it would be very accommodating for SEBI from an administrative point of view. Many of the administrative issues of the regulator shall be resolved and improve the effortlessness of regulating.
Conclusion
Although it is indeed the first time that the government had proposed the consolidation of SEBI regulations, it is not the very first time that such an idea was mooted. In the year 2013, the Financial Sector Legislative Reforms Commission (FSLRC), had projected repealing several Acts and framing one common Indian Financial Code, which will be non-sectoral in nature and replace a majority of the then principal regulations for the financial markets. Despite the fact the latest suggestion talks about the amalgamation of four Acts into one single Code, the FSLRC had recommended repealing as many as 15 Acts, which includes those regulating the insurance, banking, foreign exchange as well as public debt segments amongst others.
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