Ministry against diluting Sebi's regulatory powers

The ministry of finance has made it clear to the ministry of company affairs (MCA) that it would not like to compromise on the role of the Securities and Exchange Board of India (Sebi) as a market regulator.

This is in response to the J J Irani Committee's view that the rule making power for accessing capital from Indian markets should be vested with the central government.

The department of economic affairs (DEA) has sent this comment in response to the J J Irani committee recommendations on proposed amendment to the Company's Act. DEA is a department under the ministry of finance which governs the capital market watchdog Sebi.

The DEA note was prepared with inputs sent by the market regulator. According to sources close to development, Sebi felt that if the company law is amended to have central government as the ultimate rule making body for capital markets, it will nullify the role of Sebi in developing the capital markets.

Sebi, in its note to the DEA, has objected to any plans to amend two sections "" Section 77AF and Section 55A "" of the Companies Act which encompass a major part of capital market operations.

These empower the Sebi to regulate norms related to buyback of securities from the market under Section 77AF and public issue, allotment, trading of securities and payment of dividend etc under Section 55A.

These sections also govern the listing agreement clause which empowers Sebi to enforce corporate governance rules under Clause 49. Otherwise, there is no explicit law governing the role of Sebi to enforce corporate governance norms.

The J J Irani committee was set up by the ministry of company affairs to propose changes to the Companies Act.

The Sebi note to the DEA has also mentioned that the joint parliamentary committee was also in favour of Sebi being the regulator on pricing and penalising capital market issues.

Various operations at present governed by Sebi include registration of the prospectus of listed companies, specification of disclosure on issue of securities, administration and filing of accounts, notice of scheme of mergers and acquisitions, etc.