SEBI opposes Centre’s proposal to transfer surplus money to CFI

Regulator says the plan will undermine its autonomy
The government’s proposal to transfer surplus money with the Securities and Exchange Board of India (SEBI) to the Consolidated Fund of India (CFI) has met with a strong opposition from the regulatory body.
The capital markets regulator feels that the proposal would result in compromising its “autonomy and its ability to function effectively” towards the progress and development of the Indian securities market. The government has proposed an amendment to the SEBI Act, which states that the SEBI would constitute a reserve fund and 25% of the annual surplus of the general fund would be put in the reserve fund. Further, the size of such reserve fund cannot exceed the total of annual expenditure of the preceding two financial years. More importantly, the surplus of the general fund, after factoring in all the SEBI expenses and the transfer to the reserve fund, needs to be transferred to the CFI as per amendments proposed in the Finance Bill, 2019. SEBI Chairman Ajay Tyagi had also taken up the matter with the Ministry, while highlighting the employees’ concerns. “These proposed amendments are regressive in nature as they are against the spirit of the SEBI Act… Autonomy of a regulatory institution like SEBI is critical… The proposal would result in compromising SEBI’s autonomy and its ability to function effectively towards its stated objectives, and thus, hamper the progress of Indian securities markets,” stated the letter. Incidentally, all the penalties levied by the SEBI already go to the CFI. Similarly, settlement amounts are also credited to the CFI. The general fund of the SEBI, which currently has a balance of over Rs. 3,000 crore, is used to meet the expenses of the regulatory body, including salaries and allowances. The fund gets money via charges that the SEBI levies on market participants in the form of registration or processing fees.

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