"If regulators have to depend on the executive for the release of funds, the question of independent behaviour by the regulators will be jeopardised. It is necessary to carefully consider the pros and cons of taking (away) the financial autonomy from the regulators," he said at a lecture at IMC in Mumbai.
Bhave was reacting to reports that the government plans to make regulators deposit their surplus funds with the Consolidated Fund of India.
"Currently, there is a line of thought - and you must have read about it in the media - that regulatory authorities should not be allowed to have funds of their own and that these funds should be merged with the Consolidated Fund of India," Bhave said.
Stating that regulatory autonomy vis-à-vis the executive is not only necessary, but also essential, he pointed out that in the case of SEBI and the Insurance Regulatory and Development Authority (IRDA), financial autonomy was built into legislation, which provides that such authorities would establish a separate fund into which the fees paid by market intermediaries would be credited.
At present, the money coming to regulators like SEBI by way of penalties is credited to the Consolidated Fund of India.
The SEBI chairman, however , did not elaborate how the proposal would be implemented or on the account heads that the regulator would be able to retain as and when the proposal was implemented. "Such funds are to be used by these authorities to discharge the functions enumerated in the law," Bhave said, although he conceded that since SEBI is a comparatively new body, it is still in the process of evolving into a smoother regulatory-executive interface.
He also highlighted the need for a review of existing laws regarding appointment and removal of members of regulatory bodies.
"Regulators do not enjoy protection in terms of the conditions under which their service can be dismissed by the executive," he pointed out. He added, however, that there is no tradition of removing members at SEBI.
Price-rigging
Bhave said the investigation into incidents of price-rigging carried out by his agency and by other government departments are cleaning up the rot in the market, and this would protect investors.
"Investors should be happy that the market is getting cleaned up," Bhave said. "There is no need for them to be nervous. Investors should be happy that wrong-doers are caught."
Investor confidence in markets has been ruffled in the past few weeks with the Central Bureau of Investigation arresting some bank officials on charges of corruption, including the LIC Housing Finance chief executive. SEBI had charged promoters and brokers of rigging stock prices.
The Intelligence Bureau had reportedly passed on information to the market regulator about some brokers' involvement in price manipulation in specific stocks.
Source: http://www.domain-b.com/economy/general/20101211_cb_bhave_oneView.html
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