On evening of March 22nd 2017 Lok Sabha passed Finance Bill 2017 bringing amendments to a bulk of legislations including, SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956 (SCRA) and Depositories Act, 1996. Here’s a quick glance through the recent amendments in Securities laws brought by this Bill .
- Discretionary power of SEBI to adjudge quantum of penalties reinstated: The Bill adds explanation to section 15J of the SEBI Act and similar explanations to the provisions of SCRA and Depositories Act. Explanation so added stipulates that discretionary power of an adjudicating officer to adjudge quantum of penalty shall have always been there in the SEBI Act, and exercised under provisions of section 15J.
- SAT to be Appellate Body for SEBI, IDRA and PFRA: SAT will be Appellate body for Insurance Regulatory and Development Authority (IRDA) and Pension Fund Regulatory Authority (PFRA). Appeal can now be filed before SAT against orders passed by said authorities, all other provisions under SEBI Act regarding appeal to SAT shall apply mutatis-mutandis upon appeals filed against orders of IRDA and PFRA.
- The Members of the Tribunal distinguished as Judicial member and Technical Member:
- Who can be a Technical Member: A secretary /additional secretary in ministry or department of central government/state government or a person of equivalent post or a person of proven ability having experience of at least 15 years can be a Technical Member;
- Who can be a Judicial member: Sitting or retired judge of High Court with atleast 5 years of experience. However for Presiding Officer, criteria is that he should be Judge of Supreme Court or Chief Justice of High Court, or a Judge of High Court having experience of atleast 7 years.
- Specific provision for SAT to have benches: SAT can now exercise its jurisdiction through benches. A bench shall be constituted with atleast one Judicial member and Technical Member;
- Process enumerated for settling difference in opinions of members: Any difference between the opinion(s) of members of SAT shall either be heard and decided by Presiding Officer or shall be decided according to the opinion of the majority of members of SAT.
- Appointments/removal of members of SAT: Central Government will appoint Presiding Officer and other Judicial members in consultation with Chief Justice of India. Whereas, Technical members will be selected on recommendation of Search cum Selection Committee which shall be convened by Secretary, Department of Economic Affairs. Further. Procedure for removal of members of SAT has also been revised.
- Who is not eligible for appointment in SAT: Board members or Senior Management personnel of above-said authorities shall not be eligible to be appointed as member or presiding officer of SAT during tenure of their service and two years thereafter. However, it is provided that already serving members can continue for their appointed terms.
- Tenure of members revised: All members of SAT can be appointed for maximum tenure of 5 years, subject to reappointment for a further tenure of 5 years. However, no member shall hold office after attaining seventy years of age.
An unprecedented feature of this money bill is that it amends around 40 legislations (both taxation and non-taxation), merges 8 autonomous special quasi-judicial tribunals into others and rationalizes their constitution. Idea of these mergers seems to unify proliferating tribunals and boost their performance. However, some of the mergers like merger of Airports Economic Regulatory Authority Appellate Tribunal into the Telecom Disputes Settlement and Appellate Tribunal are peculiar and raises questions as to how effectively adjudications of disputes will be done by unified bodies when the underlying industries are so varied.
Further, the introduction of explanation into SEBI Act, Depositories Act and SCRA may seem to be insignificant but brings a major clarification on an ongoing conundrum of law regarding discretionary powers of SEBI in adjudging quantum of penalty which was created amongst whole securities market post the Supreme Court’s decision in matter of SEBI Vs Roofit Industries Ltd.