Government's powers to remove members and supersede Sebi board are "necessary part of democratic control over executive institutions", says the capital market regulator.
Government’s powers to remove members and supersede Sebi board are “necessary part of democratic control over executive institutions”, says the capital market regulator.
The Securities and Exchange Board of India’s (Sebi) submission has come in response to certain observations made in the Financial Sector Assessment Programme (FSAP) report for India, a joint effort by IMF and the World Bank.
The response of the regulator has been mentioned by the Financial Stability Board (FSB) in the latest peer review of India.
In the Financial System Stability Assessment update on India, which was issued in early 2013, it was observed that like the other supervisory agencies, the legal framework limits the de jure independence of Sebi.
The report had noted that members of Sebi can be removed without cause and the government can supersede the board and give directions to the regulator on matters of policy.
Remedying these provisions would further strengthen credibility of the supervisory process, the report had suggested.
In response, Sebi said all these powers exercised by the central government are “only done as a measure of last resort and in fact have not been exercised ever in the history of Sebi (which was established statutorily in 1992)”.
These “powers are a necessary part of democratic control over executive institutions”, it added.
Another observation was the need to strengthen criminal enforcement and whether arrangements such as dedicated criminal court tribunals can be extended to all types of securities offences.
Sebi, in its response, has said the Securities Law (Amendment) Act, 2014, establishes special courts for prosecution of offences under securities laws to provide speedy trial.
Further, the Act designates the counsel representing Sebi in a trial before sessions courts as deemed public prosecutors for prosecution proceedings, as per the latest FSB report which has cited the Sebi responses.
FSB brings together entities from 24 nations and jurisdictions, including India. It works towards promoting effective regulatory, supervisory and other financial sector policies in the interest of financial stability.