Regulators may get representation in SROs

Regulatory authorities will have only a minor representation in the proposed self-regulatory organisation (SRO) for stock market intermediaries.

A clear picture as to whether there would be a single SRO for all market participants or multiple SROs catering to different segments would emerge only after getting feedback from all the players, officials said.

It is learnt that the Association of National Exchanges Members of India (Anmi), the association of members of both the National and Bombay stock exchanges, has proposed a separate SRO for the stock broking community.

Addressing a news conference on Wednesday, M Damodaran, chairman, the Securities and Exchange Board of India (Sebi), said the regulator was yet to decide on the number of SROs required in the equity market.

At a meeting in Delhi recently, Sebi officials more or less agreed to restrict the representation of the regulatory bodies (Sebi, stock exchanges, income tax officials etc) in the proposed SROs to 20-25 per cent, while the maximum representation would come from the market players, sources said.

About three years back, there was a proposal to convert the Association of Mutual Funds in India (Amfi) into an SRO, but it did not happen.

"We are all for establishing SROs for market intermediaries. We feel that it would be worthwhile to have separate SROs for different market intermediaries," said Vinod Jain, chairman of Inmacs Management Services and former president of erstwhile Association of NSE Members of India.

In Japan and Korea, the Japan Stock Dealers Association (JSDA) and Korean Stock Dealers Association (KSDA), respectively, act as a uniform SRO for all market intermediaries.

In the United States, the National Association of Securities Dealers (NASD) act as an SRO for 5,100 brokerage firms, roughly 169,000 branch offices and more than 650,000 registered securities representatives.

However, in India, with a multitude of other market intermediaries present, there was a need for separate SRO for each of them viz., mutual funds, merchant banks, registrar and transfer agents.

The SROs would act as a first-level regulator ensuring investor protection and market integrity through effective and efficient regulation and complementary compliance services, officials said.

Finance Minister P Chidambaram, at a press conference in Mumbai recently, said he was open to the idea of "incentivising" the setting up of SRO. Setting up of SROs was outlined by Chidambaram in the Union Budget.

The proposal by Anmi for establishing an SRO was already pending before the Sebi, said Vijay Singhania, the president of Anmi.

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A clear picture as to whether there would be a single SRO for all market participants or multiple SROs catering to different segments would emerge only after getting feedback from all the players

Sebi officials have agreed to restrict their representation of the regulatory bodies in SROs to 20-25 per cent

Market players to have the maximum representation

Anmi has proposed a separate SRO for the stock broking community