)
As one Business Standard headline said, it really “rained” Bills in Parliament this monsoon session. Several much-awaited game-changing laws on companies, food security, pensions and land acquisition were passed.
The Street had a 50:50 record. Two bills related to the functioning of the market regulator were introduced and one went through. Unfortunately for the Street, the one which did not go through was the Securities Laws (Amendment) Bill, 2013. This was a crucial one that gave additional powers to the Securities and Exchange Board of India (Sebi), which it had been seeking for the better part of Chairman U K Sinha’s tenure. The powers it sought to give Sebi included search and seizure, access to call records, power to recover sums due through attachment of assets and even arrest.
The Bill also empowers the regulator with unambiguous jurisdiction over investment schemes, irrespective of form or composition. These powers were targeted at illegal but innovative financing schemes that tried to exploit grey areas in law. It also formalises the settlement mechanism, hitherto being executed by Sebi in the form of consent orders, with retrospective effect from April 2007.
The Bill was brought to replace an ordinance promulgated by the President in July. Without a legislative nod, the fate of these new powers, though alive at the moment, hangs in the balance.
According to constitutional provisions, an ordinance promulgated shall have the same force and effect as an Act of Parliament but every such ordinance “(a) shall be laid before both houses of Parliament and shall cease to operate at the expiration of six weeks from the reassembly of Parliament, or, if before the expiration of that period resolutions disapproving it are passed by both houses, upon the passing of the second of those resolutions; and (b) may be withdrawn at any time by the President.”
The monsoon session began on August 5, 2013. The six-week period when the ordinance will cease to operate expires on September 16.
While it is widely expected that a fresh ordinance will be brought to maintain status quo, that will not be a permanent solution. The new powers require Sebi to make structural changes, hire more people, draft rules and regulations and put in place a strong framework. Such uncertainty can put brakes on these efforts.
More worrying is that this uncertainty is not accidental. It was not created because the Bill was stuck in traffic. The Bill did not go through the Lok Sabha because there was severe opposition from members of several parties including Samajwadi Party, Trinamool Congress and Bharatiya Janata Party.
It has been well-documented that shadow banking activities such as illegal investment schemes and lending operations are a bane to the investing public, the exchequer, the legal/regulated businesses and the economy as a whole. Yet, our parliamentarians are united across party lines to oppose the passage of a law that attacks these activities. There have also been demands that the Bill be referred to the standing committee on finance. Your guess on who they are ‘batting’ for is as good as mine.
With the time left for elections shrinking, it is not clear if the government will have enough time and resolve to push it through. Some members are also particularly worried about the retrospective provisions on consent orders. Does that ring a bell?
