SMC bill: SMC bill to curb SEBI powers

• ABC MEDIUM
• ABC LARGE
• ABC EXTRA LARGE

Delhi: For market segments The government has made proposals to reduce regulatory difficulties in the Securities Markets Code (SMC) Bill. If this bill becomes a law, there will be a statutory time limit of 8 years for inspections and investigations by the market regulator SEBI. This 8-year limit is not applicable in case of systemic impact on the securities market. Along with this time frame, the implementation of the rules within the specified time has also been introduced in the bill. According to this, SEBI has to complete the investigations within 180 days. At the same time, investor protection should be strengthened by introducing a grievance redressal mechanism headed by an ombudsperson. Concerned sources are of the view that the 8-year time limit will bring legal certainty to old transactions. It said that it will ensure that companies are not pursued indefinitely in old cases. Sebi is likely to require additional human resources for changes such as completion of investigations in time frame and establishment of ombudsman system. Capacity building requires hiring of adequately trained personnel. 

Instead of 3 Acts

Last week the government introduced the SMC Bill in the Lok Sabha. According to this, SEBI has to set aside 25 percent of its annual surplus in the reserve fund for expenses. The remaining amount should be transferred to the Consolidated Fund of India. The Bill has been referred to the Standing Committee for further consultation. The new law will consolidate and replace the three existing securities laws - the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992 and the Depositories Act, 1996. 

Time limits are as follows

According to this bill.. SEBI cannot inspect or investigate the direction of an action if it is done before 8 years.  SEBI has to complete the investigation within 180 days. In case of delay, SEBI has to give answers in writing. After that an extension can be sought from the full time member. The period of interim orders has also been limited to 180 days. Such orders may be extended for up to two years pending adjudication, inspection or investigation. 

Responsibilities of Ombudsman

SEBI may appoint one or more of its officers as ombudspersons. Sebi is expected to require additional staff as investor complaints are likely to increase. The primary responsibility of the ombudsperson is to receive, examine and redress investor complaints. Currently, complaints are being resolved through SEBI Scores and ODR platforms. There is already a huge accumulation of cases in SCORE and ODR stations. If ombudsperson orders are added to these, there is a possibility of heavy burden on the Securities Appellate Tribunal (SAT).