| BJP sets conditions for support to insurance Bill |
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New Delhi, 5 August If the United Progressive Alliance ( UPA) government wants more foreign investment in the insurance sector, it might have to ensure, with an explicit clause in the insurance Bill, that 23 per cent of the equity brought in is from foreign institutional investors ( FIIs), non- resident Indians and foreign corporate entities. That's one of the conditions the Bharatiya Janata Party ( BJP) has put before the government for supporting in Parliament the insurance Bill, which envisages raising the cap on foreign direct investment ( FDI) in the insurance sector to 49 per cent. Former finance minister, Yashwant Sinha, opened this window during his conversation with Finance Minister PChidambaram on Saturday. This is not a new proposal and is BJP's way of ensuring that one foreign company does not get to dominate the Indian insurance sector. Sinha argued that foreign direct investments and those by foreign institutional investors should be treated separately in the Insurance Bill — because no single foreign investor should get a 49 per cent stake in an insurance company, reducing two or more Indian entities to a minority as they shared the remaining 51 per cent. According to Sebi norms, no single FII can hold over 10 per cent equity in a firm and a sub- account of an FII cannot own more than a five per cent stake. Also, FII money is considered volatile in an industry that needs stable long- term funds. "The debate internally ( in the BJP) is whether allowing FDI in a sector where only ₹ 787,900 crore has flowed in, despite liberalisation, is worth the foreign control that could creep in," said a top BJP leader. Turn to Page 16 > Says 23% of foreign investments should be by FIIs Though it's not inclined to make alegislative provision for FIIs, the govt might have to accept BJP's conditions |
| A different ball game for Sebi now |
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Second, the Ordinance by giving retrospective effect to several specific actions and orders of Sebi, especially for consent proceedings and disgorgement of ill- gotten gains from insider trading and unfair trade practices, imparts legal sanctity to Sebi's powers to pass such orders and to past orders too. Third, by enabling special courts to be set up to try all existing offences and future offences under the Sebi Act, the Ordinance not only seeks speedier trial but also, in a sense, gives recognition to the seriousness of financial crimes. Sebi will now have to frame regulations to give effect to some of the powers like search and seizure, CIS schemes, and consent orders for which circulars are already operational. This should take not more than a couple of months. Sebi's new powers makes it stand apart from other statutory regulatory bodies in the country, whether in the financial market or otherwise. It goes to the current Sebi chairman's credit to have been able to persuade the finance ministry to grant these powers and to issue an Ordinance. The sweep of the new powers should result in a paradigm shift in Sebi's extant surveillance and investigation mechanisms and make a more focussed and effective enforcement possible. That certainly will be the least of the expectations. Three questions arise. One might be tempted to ask whether such sweeping powers were necessary, and Sebi critics would love to harp back on the regulator's track record to justify the question. It would also be reasonable to examine the implications of these powers on the functioning of Sebi. The answer to the first question is an unequivocal yes, for more reasons than one. Players in the financial world usually try and remain astep ahead, urged by the impulses that are in the nature of their businesses. Many players even try to operate in the penumbra of the regulatory ambit. This leaves the regulator always playing catch- up and it can ill- afford to feel hamstrung by the absence of adequate powers to be able to act decisively and timely. At the same time, it cannot allow market players to refuse furnishing information or continue to submit false information with contumacious obduracy, or to violate securities laws with impunity by taking advantage of weaknesses in the laws. In recent times there were several instances where all the above happened. So, the sweeping powers and in some cases giving legal sanctity for actions retrospectively were necessary as well as seeking all records of telephone conversations to help in the cases of insider trading. But it goes without saying that these powers are bound to make life pretty uncomfortable for many market participants. The two principal implications of the new powers on Sebi's functioning would be on manpower and the systems and processes for surveillance, investigation and enforcement. Experts and commentators, however, seem to have focussed only on the enhancement of the staff strength. While it does not require great imagination to suggest that Sebi would need to beef up its staffing and even open more offices across the country to make the new powers operational, of no mean significance is the quality and expertise of the manpower. It may not be easy for Sebi to quickly enhance the numbers only by recruiting Sebi's own staff. Sebi would have to lean on other institutions for staff on secondment. The new powers are likely to attract and encourage many people to join Sebi. The recruitment drive would have to be accompanied by large- scale training on understanding securities laws and of the new powers, the dynamics of the market, and on an on- boarding programme of the new recruits at all levels. The new powers would also require a serious review and overhaul in many cases of Sebi's existing apparatus and mechanisms for surveillance, investigations, enforcement as well as developing the new ones. Managing the huge expectations that the new powers will inevitably engender is a challenge. In financial markets fraud and abuse happen. Many players who are now experiencing discomfiture with the new powers, will be on the look out for instances of failure to challenge the powers. In fact, a public interest litigation was filed even before the ink could dry on the Ordinance. Some of the new powers may also be challenged once Sebi begins to test them. The brunt of the blame on Sebi for failure would, therefore, rest heavier. Sebi would have the unenviable task of working out the best ways to deal with these issues and in this, its best insurance would be the speed, efficiency and decisiveness in enforcing the laws effectively. This in turn would be closely correlated with the quality of the staff and agility of the enforcement apparatus. The author was formerly executive director of Sebi and is currently an advisor and consultant to Deloitte Tohmatsu Touche India Pvt Ltd and the World Bank pratipkar21@ gmail. com The Securities and Exchange Board of India has acquired sweeping new powers under an Ordinance. Much depends on the speed, efficiency and decisiveness with which it can enforce them PRATIP KAR BS PHOTO TALL ORDER? A file photo of the Sebi headquarters in Mumbai. The sweep of the new powers the regulator has been given should result in a paradigm shift in Sebi's extant surveillance and investigation mechanisms and make a more focussed and effective enforcement possible |
EPFO gives a week for sending digital signatures This, to put in place a system of online transfer of provident fund claim settlements
Employers from across the nation have begun sending their digital signatures to the Employees Provident Fund, with Kochi firms leading others in sending the largest number of such signatures. | |||||||||||
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Company Secretary, Chennai
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