Sebi Panel Suggests Revision of Fees for Market Entities - The New Indian Express

Sebi Panel Suggests Revision of Fees for Market Entities

Published: 13th March 2014 02:57 PM

Last Updated: 13th March 2014 02:58 PM

Market regulator Sebi will soon consider a significant revision in the fees it charges from various entities so as to meet expenses for its regulatory and investor-centric activities.

A final decision on the proposed revision, which includes pushing back the fees to the level seen before a reduction was announced in 2009 for some intermediaries, would be taken after the issues are discussed by Sebi's board at a meeting scheduled for later this month, sources said.

The proposal to revise fees are based on recommendations made by a Committee on Rationalisation of Financial Resources (CRFR), which has submitted its report to Sebi after detailed discussions and a "thorough study" of various parameters.

Among others, it has been proposed to revise the fees for mutual funds, stock exchanges, brokers as also for the listed and to-be-listed companies for filing of offer documents, rights issues and takeovers.

The fee hikes are being proposed against the backdrop of lower volumes in primary as well as secondary markets, resulting in reduced fee collections.

As per Sebi estimates, the regulator's operational income (fees from intermediaries) is expected to be about Rs 165 crore in the current fiscal - ending March 31 - and at about Rs 196 crore in the next financial year 2014-15.

However, a revision in fee structure as per CRFR recommendations can boost Sebi's operational income to Rs 378 crore in 2014-15.

At the current rates, Sebi is expected to post a deficit of Rs 66 crore on operational account in 2013-14, while the gap can further increase to about Rs 85 crore in next fiscal.

However, a revision in fees can help Sebi post a surplus of about Rs 98 crore in the next fiscal 2014-15.

Before the CRFR review, Sebi's total income for the year 2014-15 is estimated at Rs 372 crore, which would include Rs 196 crore as fees from intermediaries, Rs 158 crore as income from investments and about s 18 crore as miscellaneous income.

With adoption of CRFR recommendations, the total estimated income can rise to Rs 554 crore, on account of an increase in fee income.

The total revenue expenditure is estimated at Rs 281 crore for the next fiscal and this would remain unchanged even after CRFR review. The expenditure for current fiscal is estimated at about Rs 232 crore.

After taking into account capital and extraordinary expenditure, the regulator expects to post overall deficit of Rs 146 crore in current fiscal, ending on March 31. It was estimated at about Rs 77 crore.

However, a revision in fees as per CRFR recommendations can help the regulator post an overall surplus of Rs 106 crore.

As per the recommendations, the application fee for mutual funds can be hiked to Rs 5 lakh from the existing Rs 1 lakh, while registration fee can be maintained at the current level of Rs 25 lakh.

Besides, the panel has recommended that regulatory fee for stock exchanges having turnover in excess of Rs 10 lakh crore at "Rs 1 crore plus 0.00006 per cent on turnover in excess of Rs 10 lakh crore". The overall regulatory fee would be capped at Rs 20 crore.

For stock brokers, the proposal is to restore 2006 fee structure level -- charging a fee of Rs 20 per one crore of turnover.

The committee has also suggested that filing fee for offer document, right issues and takeovers should be "restored at the level of 2007 with further streamlining across slab to make it more consistent".

According to Sebi, various investor-centric initiatives as well as the ever increasing regulatory mandate may warrant not only identification of new resources but also aligning some existing levies to the changed market structure.

In the past, the Securities and Exchange Board of India (Sebi) had hiked the fees for various market intermediaries in 2006, while a reduction was also announced in 2009.

The downward revision in 2009 was undertaken with a view that the fees levied by statutory authorities like Sebi should be adequate enough to meet revenue expenses fully and leave a little surplus for capital expenditure.

However, the committee felt that the enhanced scope and role of market regulatory in today's time, which requires much higher financial commitment in order to remain effective and efficient, was not visualised then.

Also, the anticipation of market volumes having a secular trend of growth has not materialised and decline in primary and secondary market volumes as led to reduced collection of fees by Sebi.

The review was undertaken by the internal CRFR committee as per recommendations of Sebi's audit committee.

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