Sebi may finalise surplus funds transfer, cut intermediaries' fees on Mar 1

The Securities and Exchange Board of India (Sebi) and the Centre may find common ground for transferring the market regulator’s surplus reserves to the exchequer.

A decision on the long-pending government demand is likely to be taken at Sebi’s board meeting to be held on March 1. 

Currently, among autonomous regulatory bodies, Sebi has the highest surplus reserves, followed by the Insurance Regulatory and Development Authority (Irdai).  

Sebi’s total surplus reserves stood at Rs 3,170 crore as of March 2017. However, this was before the market regulator shelled out nearly Rs 1,000 crore to purchase IDBI Bank’s building in Mumbai.

Finance Minister Arun Jaitley is to address the Sebi board, a customary practice after the presentation of the Union Budget. Other than the transfer issue, the Sebi board will also discuss some Budget-related announcements on the stock market and the recent corporate governance lapses at India Inc. 

The transfer of surplus reserves comes at a time when the regulator is all set to reduce fees of intermediaries, especially stock and commodity brokers, by up to 98 per cent.

Sources said that the Sebi board is likely to give nod to the regulator’s expert committee recommendations on reduction of fees. According to it, stock brokers fees will be reduced to Rs 10 from the existing Rs 15 for a turnover of Rs 1 crore.

For the agri commodity, Sebi likely to slash the fees to Rs 1 per crore. Fees levied on filing and refiling of issues is slated to also be reduced by 50 per cent. The new fees structure is likely to be effective from April 1.

“The objective of the fees reduction is to make the market more competitive and lower the cost of transaction on investors, especially those dealing with agri commodities,” said a regulatory official. Meanwhile, Sebi is rationalising fees paid by the stock exchanges.

Sebi generates revenue by levying fees on intermediaries for registration and renewal of licenses and also for filing and refiling of offer documents.

The fee cut proposal could impact the regulator’s overall corpus and revenue projection for the financial year 2020. 

According to the Sebi annual account of 2017-18, it had collected Rs 518 crore as annual fees and subscription from intermediaries including stock exchanges, brokerages and so on. Besides, the Sebi board is also takng up the issue of lack of governance in firms like Zee group, Sun Pharmaceuticals, IL&FS and ICICI Bank.  

The exposure of housing finance companies (HFCs) to the real estate sector would also be on the agenda of the March 1 board meet.

On the governance part, the ministry of corporate affairs had last week raised concerns about HFCs’ and non-banking finance companies' exposures to real estate firms.  This would also be taken up by the board and some measures may be put in place to curb such instances.

Other than these, Sebi is also planning to tweak procedures for designated depository participants (DDP). Sources said that Sebi may do away the process of periodic registration and provide lifetime membership to DDPs. The regulator, however, will have the powers over registration in the case of any wrongdoing.

“It is good from the ease of doing business stand point but not material change. The registration allows DDPs to issue FPI licence under authority from Sebi. And, they are supposed to ensure compliance with Sebi registration for FPIs,” said a tax expert.