Sebi Chief seeks review of Budget proposal for transfer of surplus funds to the govt

Ajay Tyagi, the Chairman of Securities and Exchange Board of India (Sebi) on July 10, wrote to the finance ministry, with a request to review the Budget proposal that mandates transferring 75% of the market regulator's surplus funds to the central government.

Tyagi, in the letter said the 2019 Finance Bill’s proposal would affect how Sebi functions and also the securities market. He said the Financial Stability and Development Council (FSDC) were already discussing the proposal and that the amendment to the Sebi Act, through the Finance Bill, could have waited until the Council's final decision. Tyagi argued that the reserve funds protect the interests of the investors and its importance.

Sebi Employees Association (SEA) employees, the brokers' forum, and many other market participants are against the move, saying it amounts to an infringement of the independence of the regulatory body.

“Two provisions — one related to the surplus transfer and the other related to seeking prior approval from the finance ministry for raising expenses — haven’t gone down well with the markets regulator. The provision is under review,” said an official anonymously as per a report byBusinessStandard.

Sebi also sees this new provision as an additional tax.

“Sebi levies fees on intermediaries for rendering services but the move to transfer funds would become an additional tax on market participants,” said another person aware of the development to Business Standard.

The Department of Economic Affairs’ (DEA's) reportedly came up with the idea to “address the issue of accumulation of huge surplus funds” with Sebi. The DEA had checked with the law ministry, which felt the funds received by Sebi “are public money and all public money received on behalf of the government would be part of the public account”.

It has been a long-pending demand of the government to transfer surplus funds to the public account; Sebi had not agreed. The DEA had apparently held several meetings with Sebi on the same for over 6 months, without succeeding thus far.

With inputs from Business Standard