Consolidate laws to protect investor interests: NSE review

Our Markets Bureau

Mumbai, Nov 19: The protection of investor interests requires consolidation of all laws relating to the securities market into a single piece of legislation, preferably called the Securities Act, and assigning its administration to one agency, said a recent Review on Indian Securities Market conducted by the NSE.

Further, reviewing the regulatory issues facing the Indian securities market, the NSE review says it would be better if a special mechanism, like a consumer forum, is created to dispose of all investor grievances summarily. This piece of legislation should prevail over general laws like the Companies Act, the UTI Act, the Consumer Protection Act, the Contracts Act, etc, and the agency should work in close coordination with regulators for other areas of the financial market.

According to the NSE review, while there are several statutes regulating different aspects of the Indian securities market, there are many regulators as well. All this has caused a lot of confusion not only in the minds of investors, but also among the various agencies who administer these legislations.

Further, because of various regulators, the responsibility for supervision and development of the securities market is fragmented among different agencies. “As the roles of various agencies overlap, there is scope for duplicate and inconsistent regulation,” the review added. Despite vast improvements in market design and consequently, operational efficiency, the market remains vulnerable to crisis. Regulators and self regulatory organisations (SROs, stock exchanges) need to strengthen their capability to detect unfair trade practices, investigate them expeditiously and award exemplary punishment to the miscreants, the NSE review said, adding that “they need to have right quality and quantity of people to enforce securities laws.”

As regards quality personnel, the NSE review says, the confidence of the investors can be maintained and enhanced by making provisions for professional intermediation services through a system of certification. Industry, SROs and regulators have made a modest beginning, but not adequate, given the dimensions of the market. The Sebi-registered members and brokers and their personnel should be required to update their skills and expertise by seeking certification at intervals of five years, the review believes.