Powers of SEBI & RBI in Finance Bill 2019

The Finance Bill 2019, one of the documents of the Union Budget 2019-20, gave certain powers to the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).Finance Bill

Amendments to RBI Act

  • More Powers to regulate NBFCs: It has given greater powers to regulate Non-Banking Finance Companies (NBFCs) including powers to seek financial and related information about the group companies.
  • Regulation of HFCs moved from NHB to RBI: The National Housing Bank (NHB) Act, 1987 was amended to take away regulation authority over the Housing Finance Companies (HFCs) from NHB and to RBI.
  • Removal of Directors & Supersession of board: Section 45-ID and 45-IE were added to the RBI Act, 1934. It empowers RBI to remove one director or supersede the entire board of directors in the public interest or financial stability or securing ‘proper’ management or prevent affairs of a NBFC being conducted in a manner detrimental to depositors /creditors.
  • Resolution of NBFCs: Under newly inserted section 45MBA, RBI is empowered to frame schemes to amalgamate an NBFC with any other NBFC or reconstruct it, or split the NBFC into different units.
  • Non-uniform approach and a missed opportunity: These are the extreme provisions empowering the governments/regulators to interfere in legitimate businesses in an emergency.
  • Debarment of Auditors: RBI, has been provided an explicit power to remove or debar the auditor from exercising the duties as auditor of any RBI regulated entities for a maximum period of three years, at a time.

Amendments to Securities Contracts (Regulation) Act (SCRA), 1956
Penalty on failure to furnish information to SEBI: Section 23A of SCRA has been amended. The penalty under it was leviable if the listed entity failed to report to the stock exchange only. This has been amended to let the penalty on failure to furnish information, return, etc. to the SEBI as well or as required under rules made under SCRA.

Amendments to SEBI Act, 1992

  • Checks and Balances on SEBI’s Expenses: Finance Bill amends section 14 of the SEBI Act and constitutes a Reserve Fund. SEBI General Fund can be utilized for capital expenditure as per annual capital expenditure plan approved by the SEBI board and the Central Government. 25% of the annual surplus of the General Fund is required to be credited to this Reserve Fund and SEBI has to transfer the rest 75% of its annual surplus from the General Fund every year to Consolidated Fund of India (CFI).
  • Clarification on Electronic Communication & penalty on broker: SEBI under section 15C of SEBI Act, can ask a listed company or any person who is registered as an intermediary, to redress the grievances of investors. It can now impose penalties of up to Rs 1 crore on brokers for certain violations.
  • Alteration, Destruction etc. of records and failure to protect electronic database: Section 15HAA has been inserted whereby any alteration, destruction, etc. of records done knowingly so as to impede, obstruct, or influence the investigation, inquiry, audit, inspection or proper administration of any matter under SEBI will be penalised with minimum Rs 1 lakh extendable upto Rs 10 crore or 3 times the profits made out of such act, whichever is higher.

About Reserve Bank Of India:
♦ Headquarters: Mumbai
♦ Founded: 1 April 1935, Kolkata
♦ Governor: Shaktikanta Das

About SEBI:
♦ Founded: April 12, 1992
♦ Headquarters: Mumbai
♦ Chairman: Ajay Tyagi