Financial sector needs single tribunal

A proposal has been made in government to convert the Securities Appellate Tribunal (SAT) into a “Financial Services Appellate Tribunal” to pay attention to grievances against orders passed by various sub-sectoral regulators. Currently, the SAT hears appeals only against orders passed by the Securities and Exchange Board of India. Our country has not opted for a single integrated regulatory approach unlike the UK, which has the Financial Services Authority as the sole regulator. We do not even have a “twin-peak” model where regulatory oversight is divided between the role of market development and safety and the role of conduct-of-business regulation.

There may be no single proper approach here, the reality is that individual institutions are regulated by multiple regulators. For example, a firm or group of firms may be a member of stock exchanges, commodity exchanges, provide advisory or distribution services for mutual funds and insurance companies, investment banking services and also be a mediator in the money markets. We have many cases of commercial banks regulated by the Reserve Bank of India (RBI) also carrying on depository participant business, regulated by SEBI.

While there are various point of view for and against having different regulators for different roles, an important feature of any good regulatory system having an effective check and balance on the regulator’s role in the form of an appellate process as a matter of right. An appellate mechanism keeps regulators on their toes and improves regulation.

There may be a convincing case to have different horses run different course for the key regulation of various sub-sectors. However, the appellate process and the factors that would weigh with an appellate body in judging a decision would be very similar, and primarily a function of well established principles of administrative law. Therefore, consolidating all the potential appellate powers in one single tribunal without creating multiple tribunals would be a very welcome measure.

Written by admin on September 9th, 2009 with no comments.
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