Single securities code to ease compliance, say experts

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February 3, 2021 9:26 AM

Some experts believe that the Union Budget could have done more to channelise savings into the Indian equity market.

single securities codeThe finance minister also exempted TDS on dividend paid by the InVITs and REITs.

The proposal to create a single Securities Code, as announced by the finance minister Nirmala Sitharaman on Monday, will help in reducing regulatory overlap and ease compliance for market participants.

Capital market participants also welcomed the move to charge foreign portfolio investors at the lower end of the tax treaty on dividend income.

In her Budget speech, finance minister Nirmala Sitharman proposed to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 (SCRA) and Government Securities Act, 2007 into a rationalised single securities markets code.

According to market experts, this could have a far-reaching impact on the capital markets if it was executed in the right manner. G Pradeepkumar, CEO, Union AMC, said, “There has been a regulatory overlap in the capital market, if a uniform securities code is implemented then this can have a far-reaching impact on the securities market. The details of this measure need to be watched.”

When it came to dematerialised shares for instance, experts had to refer to various Acts such as the SEBI Act, the Depositories Act and the SCRA which would make legal compliance complex, this may not be the case if a composite code is implemented.

Abhinav Bhalaik, partner, Algo Legal, said, “An example is with dematerialised securities, which are governed by both the SEBI Regulations and the Depositories Act. Like this, there are many regulations in which one needs to look at various securities law statutes in order to ensure regulatory compliance. The single securities code if done right, will make compliances efficient and transparent. It would make enforcement of regulations simpler and reduce litigation.”

Another category, according to him, that would benefit is compliance in relation to a single securities code is unlisted public companies.

The finance minister also exempted TDS on dividend paid by the InVITs and REITs. This according to market experts will help in attracting more foreign funds to the market. UR Bhat, co-founder, Alphaniti, a tech-enabled investment platform, said, “The exemption of TDS on dividends paid to REITs and InVITs is a good move. It will remove some of the compliance burden and help in attracting more funds from foreign investors.”

Some experts believe that the Union Budget could have done more to channelise savings into the Indian equity market. “These are tough times for the government in case they were not, I would have hoped for the government to remove the LTCG and do more to channelise savings into the capital markets,” said G Pradeepkumar. Market participants also said that more clarity on the regulation of the gold trade exchanges with respect to uniform securities code and a mention of digital currency would have also been helpful.

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