New market code may constrain Sebi funding

Greater clarity is also needed on the proposed Ombudsperson to resolve investor complaints, experts feel

- KHUSHBOO TIWARI & VIKAS DHOOT

As the government moves to revamp India’s securities legislation, unifying three different laws into the Securities Markets Code (SMC), regulatory experts and market insiders have raised concerns on potential funding challenges for the stock market regulator.

While the new code simplifies several norms and sets timelines for investigations by the market regulator, it proposes the constitution of a reserve fund for the expenditure incurred by the Securities and Exchange Board of India (Sebi) and the transfer of the residual corpus to the Consolidated Fund of India.

“Twenty-five per cent of the annual surplus of the General Fund in any financial year shall be credited to such a reserve fund which shall not exceed the total of annual expenditure of the preceding two financial years,” the proposed Bill states. The amount credited to the reserve fund will be utilised to meet Sebi’s expenses.

“After crediting the portion of the annual surplus... the remaining annual surplus of the General Fund for that financial year shall be credited to the Consolidated Fund of India,” states the proposed Bill. Settlement amounts and penalties collected by Sebi are already deposited to the Consolidated Fund of India, and are not included in the regulator’s income since 2003-04.