NEW DELHI: The Central government on Thursday amended the Securities and Exchange Board of India (SEBI) Act through a clause in the Finance Bill to create a mechanism whereby SEBI will have to transfer surplus funds from its general funds after transferring part of the money to a newly created Reserve Fund.
The Finance Bill with amendments introduced was passed by the Lok Sabha on Thursday. The amendment to SEBI Act says that “After incurring all expenses … and transfer to Reserve Fund…, the surplus of the General Fund (of SEBI) shall be transferred to the Consolidated Fund of India.”
It also provides for constitution of a Reserve Fund, where 25 per cent of the annual surplus of the General Fund in any year has to be credited. Earlier, the rule was that only penalties raised by SEBI were being credited to the Consolidated Fund of India, which is the fund maintained by the Central government for its income and expenditure.
In some ways, this is similar to the government’s insistence that the RBI transfer its surplus funds to it. Though the money involved would be extremely small compared to the RBI’s reserves, many observers nevertheless feel the amendments could undermine SEBI’s autonomy as a market regulator.
The amendment also provides for the Central government’s approval of capital expenses to be incurred by the SEBI Board. “The capital expenditure, as per annual capital expenditure plan approved by the Board and the Central Government…,” a clause in the amendment reads. Earlier, such approval was not needed.
This move has not gone down well with the markets regulator. SEBI chairman Ajay Tyagi has already written to the finance ministry protesting the government’s move to transfer surplus funds available with SEBI to the Consolidated Fund of India.
Tyagi, in a letter dated July 10, has said the 2019 Finance Bill’s proposal would affect SEBI’s functions as also the securities market. It has pointed out that the government has gone ahead with the amendment even as the Financial Stability and Development Council were still discussing the proposal.