The D R Dhanuka Committee has recommended more powers for the Securities and Exchange Board of India (Sebi) to monitor activities of foreign entities trading in Indian securities.
The main recommendation of the committee is the consolidation of the Securities Contracts (Regulation) Act, 1956, and the Sebi Act, 1992, into a composite securities legislation.
It has said Sebi should be the sole regulator of the securities market, even where the Companies Act is involved. The committee has included a chapter on how Sebi and its officials should be empowered for investigation and enforcement.
The committee has also included several new definitions, including that of derivatives, fraudulent and unfair trade practices, insider trading, intermediaries, issuers, mutual funds, offer documents, private placement, qualified institutional investors, self-regulatory organisations, and venture capital funds.
A provision has also been made for a comprehensive definition of securities to include derivatives, plantation companies, time shares, and securitised instruments. Several additional provisions have been introduced in the Consolidated Securities Act to provide a statutory basis for regulation of the securities market.
The definition of qualified institutional investor enables the identification of a class that may be subject to a more liberal regulation regime. This will be relevant in the context of private placement. The proposals also include regulation of issuers and improving disclosure standards.
The scope of Sebi's powers to issue directions has been expressly extended to investors or any other person, rather than merely intermediaries.
The provisions regarding contracts and options in securities have been streamlined. Dealings in securities may take place in any of three ways: through members of the stock exchange; spot delivery contracts; and special exceptions such as repos in government securities, securities of private companies, private shareholder agreements and deliveries as per the Takeover Code. These may take place through agents other than stock exchange members and not necessarily as spot delivery contracts.
