After the Budget proposal mandated transferring 75 percent of the market regulator's surplus funds to the central government, Securities and Exchange Board of India (SEBI) Chairperson Ajay Tyagi has written to the Prime Minister's Office (PMO) and the Finance Ministry seeking a review.
The letter dated on 10 July said that the move which was proposed a part of the Finance Bill, 2019, would affect the functioning of SEBI as well as the securities market, Business Standard reported.
According to the proposal, after meeting all expenditure, SEBI should transfer 75 percent of the surplus amount to the Consolidated Fund of India.
His letter comes after SEBI employees last week wrote to Sitharaman to reconsider her proposal.
Tyagi argued that the proposal was already being discussed by the Financial Stability and Development Council (FSDC), regulator for the financial sector, and that the amendment to the SEBI Act, through the Finance Bill, could have waited until the Council's final decision, the report said.
He argued on the rationale for the regulator keeping a reserve fund and its importance in protecting the interests of investors.
Potential Infringement of Regulatory Body’s Independence?
The SEBI Employees Association (SEA) and many other market participants have questioned the move stating that it potentially amounts to an infringement of the independence of the regulatory body.
“SEBI’s standing as an autonomous regulatory body will be compromised due to the proposed requirement of government approval for part of its expenses,” the letter from SEBI employees had said, The Hindu Business Line reported.
“Two provisions — one related to the surplus transfer and the other related to seeking prior approval from the finance ministry for raising expenses — haven’t gone down well with the markets regulator. The provision is under review,” Business Standard reported quoting an official.
SEBI has also argued that the new provision is like an additional tax.
(With inputs from Business Standard and The Hindu Business Line)
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