I have an article in the Economic Times today on need to have similar powers for financial regulators. Here is an excerpt:
The FM in his budget speech made an important announcement on financial sector reforms which few commentators picked up. He proposed setting up of a Financial Sector Legislative Reforms Commission “to rewrite and clean up the financial sector laws to bring them in line with the requirements of the sector.”
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To just compare three of the Acts would bring out the need to harmonise the laws – FCR Act, Sebi Act and Irda Act. While the Forward Market Commission (commission) formed under FCRA has no clause deeming it a body corporate, both the Sebi Act (board) and the Irda Act (authority) formed under the other two Acts deem them bodies corporate with power to hold property, power to sue and specifically give them perpetual succession . While the commission has recommendatory powers, the authority has generic powers to regulate the insurance industry, the board has specific powers to regulate, adjudicate and penalise persons. Conversely, the commission has powers to file a criminal case in court but the authority has no explicit powers to do so. In contrast, the board has power to impose penalties up to Rs 25 crore, pass remedial and cease and desist orders, suspend the registration of intermediaries besides being able to file a criminal prosecution.
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There is thus a need to come out with a model Act based on which the governance structure, powers and adjudication role of the regulators and the regulations is re-drafted . Assuming , there will be progress on this, it is also high time that we depart from the 1950s mentality of regulations i.e., that all speculation is evil and have a modern set of regulations particularly in the SCRA and the FCRA. The ancient and quixotic prohibitions on forwards and options in the securities and commodity markets need to give way to a modern set of regulations which are agnostic to foggy notions of the evils of a satta-bazaar.
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