There have been many regulatory changes made by the Securities and Exchange Board of India (SEBI) that are intended to make it easier for investors to resolve disputes and have standard advertisements in the financial markets. These reforms are meant to make regulation easier without compromising on protection.
These reforms are part of SEBI’s efforts to improve the ease of doing business in the Indian securities market.
Revised Settlement Rules Aim to Improve Transparency
In accordance with the revised settlement structure, SEBI has established a well-defined formula for determining the amount of settlement in cases where there is an alleged breach of securities law. The formula incorporates several elements, such as the minimum fine leviable for the breach, the stage at which the proceedings are held, the nature and gravity of the breach, as well as the aggravating factors, if any.
In addition, the new structure by SEBI has ensured separation of the recovery of wrongful gains from the determination of the basic settlement amount. This is expected to address problems of double-counting.
Depending upon the circumstances, the settlement structure may incorporate the settlement amount, disgorgement of wrongful gains, or regulatory actions or all of the above.
The revised settlement structure also provides for the fast-track settlement of selected cases.
Common Advertising Code Approved
A Common Advertisement Code has also been approved by SEBI relating to seven types of entities, which include stockbrokers, depository participants, investment advisers, research analysts, online fixed deposit intermediaries, portfolio managers and mutual funds or asset management companies.
A common code has been framed to avoid the requirement of compliance with separate advertising guidelines pertaining to different categories of entities.
Prior approval would not normally be required for advertisements, except in the case of advertisements with celebrity endorsements. The advertisement will generally need to be reported within three working days from the date of advertisement.
Celebrity endorsement would also be allowed for brand promotion under certain conditions.
What the Changes Mean for Investors and Businesses
The new rules would assist the financial markets in understanding what needs to be done by them and would save time through administrative processes. Standardizing advertising procedures would also facilitate planning and conducting a marketing campaign while fulfilling the common requirements.
In regard to the investor, the importance of recovering any gains improperly acquired and imposing remedial action on them is evident. Even the expedited procedure would not relieve the regulator from its responsibilities of protecting investors and compliance with securities laws.
But ultimately it depends upon implementation, specific requirements for each firm and compliance with the law.
Conclusion
The changes made in the settlement system of SEBI and the Common Advertisement Code are positive moves for simplifying the process of regulation in Indian financial markets. With a structured approach in the calculation of settlements and standardized advertising standards, it is expected that market regulation will be easier while retaining the protection of investors.
The market participants have to check the relevant legislation and update their internal processes accordingly.
