SEBI’s latest notification permitting its chairperson to bypass the same old session course of for regulatory modifications has raised issues over transparency and potential for overreach, with specialists in search of readability about ‘exigencies.’
Historically, the market regulator has sought suggestions by dialogue papers from trade contributors, authorized specialists and the general public earlier than making regulatory amendments.
Although public session was inspired, it was by no means a statutory requirement — permitting the watchdog to cross sure guidelines with none suggestions. SEBI just lately mandated a 21-day public session interval earlier than implementing regulatory modifications, besides in exigent conditions, the place the chairperson can shorten or waive this requirement.
Regulatory overreach?
Whereas this exception goals to protect SEBI’s means to behave swiftly, authorized and market specialists argue that with out clear pointers, it might result in arbitrary decision-making.
“Whereas this discretionary energy ensures regulatory agility and the power to reply swiftly to crises, it concurrently raises pertinent issues concerning transparency, predictability and the potential for regulatory overreach,” mentioned Tushar Kumar, an advocate on the Supreme Court docket of India.
Frequent use of this waiver, market contributors warn, might erode trade confidence, elevating fears of preferential therapy, insufficient safeguards and credibility dangers for the regulator.
Want for readability
Though the board should ratify the chairperson’s determination, market specialists are calling for clear, publicly out there standards for what qualifies as an “exigency” and requiring detailed justifications for every waiver.
“The subjective nature of the time period ‘expedient’ creates a threat of arbitrary utility; the influence in the marketplace and trade hinges on the considered train of this energy,” mentioned Kunal Sharma, Associate at Singhania & Co. “The absence of strong, clearly-defined standards might result in regulatory uncertainty and potential authorized challenges, as stakeholders might query the legitimacy of rules handed with out session,” Sharma mentioned.
Kumar echoed this concern, calling for the scope and rationale for invoking such powers to be clearly articulated to make sure that “exceptions don’t grow to be the norm, and ideas of pure justice and participatory governance stay intact.”
Consultants additionally counsel periodic opinions of waived rules to evaluate their justification and effectiveness of such rules.
Seemingly exigencies
Whereas the regulator has not specified what constitutes an exigency, specialists counsel the waiver may very well be utilized in instances of systemic dangers threatening market disruptions, cybersecurity breaches in market intermediaries’ infrastructure, widespread market manipulations and world financial shocks.
Conditions, the place delays in regulatory motion might result in irreparable hurt to market integrity or investor confidence, reminiscent of the upcoming collapse of a systemically vital monetary establishment; and unexpected technological developments might additionally necessitate quick regulatory changes.
Moreover, judicial directives mandating expeditious regulatory motion or alignment with world requirements might additionally justify the invocation of this waiver, specialists mentioned.
