Securities Market Code Bill for boosting Sebi power, accountability

New Delhi: Finance minister Nirmala Sitharaman on Thursday introduced in the Lok Sabha the Securities Market Code Bill that proposes to expand capital market watchdog Sebi's regulatory power and board strength but tighten provisions of the conflict of interest and accountability for its top functionaries.

The bill, which is now referred to the Parliamentary Standing Committee on Finance for further consultations and scrutiny, also seeks to decriminalise certain provisions of extant securities laws.

It proposes to expand the Sebi board to have up to 15 members, including the chairperson, from the current nine, and provides for a transparent and consultative process for issuing any subordinate legislation, among other things.


Importantly, it stipulates new grounds for removal of a Sebi member if he has acquired any financial or other interests that can potentially prejudice his function.

Members of the regulator have to disclose any "direct or indirect" interest, including that of family members, pertaining to the subject matter of its board meeting.

Reserve fund

Under the proposed framework, Sebi will have to set up a reserve fund for crediting 25% of its annual surplus from the general fund. This reserve fund would be used only for meeting the regulator's expenses. The remaining annual surplus will have to be transferred to the Consolidated Fund of India.

"The provision to transfer surplus funds to Consolidated Fund of India creates a balanced fiscal structure.... It ensures public accountability and prevents idle accumulation of regulatory fees," said Sunil Gidwani, partner (financial services) at Nangia Group.