Securities Market Code Bill seeks to expand Sebi's board to 15 members

New Delhi, Dec 18 (PTI) Securities Market Code Bill introduced in the Lok Sabha on Thursday seeks to strengthen the regulatory mechanism of the Sebi by expanding the board up to 15 members from existing nine members, including chairperson providing a transparent and consultative process for issuing any subordinate legislation among other things.

The Bill proposes new ground for removal of member if he has acquired any financial or other interests that are likely to prejudice his function.

It requires a member to disclose any "direct or indirect" interest, including such interest of family members concerning the subject matter of the Board meeting, and refrain from participation where such interests exist.

The Bill proposes to grant Securities and Exchange Board of India (Sebi) with additional functions like reviewing its performance and functioning, and the proportionality and effectiveness of its regulations, new progressive features such as capacity building of its employees and research, periodic study.

Sebi is required to lay down principles for guiding the implementation of the Code.

The Bill, referred to Standing Committee for further consultation, seeks to consolidate, rationalise and replace the three securities laws -- Securities Contracts (Regulation) Act, 1956; Securities and Exchange Board of India Act, 1992; and Depositories Act, 1996.

Further, to facilitate effective regulation, Sebi has been empowered to delegate some part of its registration function to market infrastructure institutions and self-regulatory organisations.

The code endeavours to build a principle-based legislative framework to reduce the compliance burden, improve regulatory governance, and enhance the dynamism of technology-driven securities markets, as per the Statement of Objects and Reasons of the Bill.

The language of the Code has been simplified to remove obsolete and redundant concepts, to eliminate duplication of provisions, to incorporate consistent regulatory procedures for standard processes, and to ensure a uniform and streamlined framework of securities laws, it said.

The proposed Bill provides an enabling provision for the Sebi board to establish a regulatory sandbox to facilitate innovation in financial products, contracts and services.

The code further seeks to strengthen investor protection, promote investor education and awareness, and ensure effective and time-bound redressal of investor grievances and it also enables an ombudsperson mechanism for redressal of grievances, it said.

Investors are given the opportunity to engage with Sebi's regulation-making process through participation in public consultations, promoting a more inclusive and transparent regulatory environment.

While on the one hand certain defaults have been decriminalised, list of civil actions like warnings and directions are provided under adjudicatory powers, it said, adding, the penalty powers have been streamlined and the quantum of penalties for defaults has been linked to quantification of gains made and losses caused.

The proposed legislation seeks to establish mechanisms to ensure coordination between Sebi and other financial regulators, including listing of other regulated instruments on Sebi-regulated stock exchanges and use of depositories, if other regulated authorities are desirous.

A structured Memorandum of Understanding (MoU) framework is introduced to enable efficient information sharing and clear delineation of responsibilities between Sebi and other regulatory authorities.

Commenting on the Bill, Nangia Group partner (financial services) Sunil Gidwani said requiring Sebi board members to disclose 'direct or indirect' interests is a vital corporate governance measure.

"The provision to transfer surplus funds to the Consolidated Fund of India creates a balanced fiscal structure. While the 'board' retains a reserve for operational autonomy, the transfer mechanism ensures public accountability and prevents the idle accumulation of regulatory fees," he said. PTI DP TRB