The government’s proposal to transfer surplus money with the Securities and Exchange Board of India (SEBI) to the Consolidated Fund of India (CFI) has met with a strong opposition from the regulatory body.
The capital markets regulator feels that the proposal would result in compromising its “autonomy and its ability to function effectively” towards the progress and development of the Indian securities market.
The government has proposed an amendment to the SEBI Act, which states that the SEBI would constitute a reserve fund and 25% of the annual surplus of the general fund would be put in the reserve fund. Further, the size of such reserve fund cannot exceed the total of annual expenditure of the preceding two financial years.
More importantly, the surplus of the general fund, after factoring in all the SEBI expenses and the transfer to the reserve fund, needs to be transferred to the CFI as per amendments proposed in the Finance Bill, 2019.
Staff missive to Centre
In a communication to the government, the employees’ association of the SEBI had said that the proposal was “regressive” especially since the SEBI did not have any mandate to raise revenue for the government.
SEBI Chairman Ajay Tyagi had also taken up the matter with the Ministry, while highlighting the employees’ concerns. “These proposed amendments are regressive in nature as they are against the spirit of the SEBI Act... Autonomy of a regulatory institution like SEBI is critical... The proposal would result in compromising SEBI’s autonomy and its ability to function effectively towards its stated objectives, and thus, hamper the progress of Indian securities markets,” stated the letter.
Incidentally, all the penalties levied by the SEBI already go to the CFI. Similarly, settlement amounts are also credited to the CFI.
The general fund of the SEBI, which currently has a balance of over ₹3,000 crore, is used to meet the expenses of the regulatory body, including salaries and allowances. The fund gets money via charges that the SEBI levies on market participants in the form of registration or processing fees.
“Since inception, SEBI is also subjected to CAG audit and so far, not a single instance of financial imprudence has been observed by CAG. Accordingly, the involvement of the government in capital expenditure approval, in addition to the process of board approval, will not add any benefit to institutional efficiency, but rather slow down decision-making and would be contrary to the principle of minimum government and maximum governance,” stated the letter.
