Market intermediaries and corporates will soon have to pay higher fees to Sebi as its board on Thursday approved proposals for fee hike to bolster financial resources of the capital markets regulator.
The Sebi board also approved the budget estimates for the next financial year 2014-15, beginning April 1, while investor protection, capacity building, enhanced market surveillance and investigation functions have been identified as key areas.After a board meeting held here this afternoon, Sebi said that the fee revision proposals are based on recommendation of Committee on Rationalization of Financial Resources.
CRFR has suggested a hike in fees charged by Sebi to various market intermediaries, as also by listed and to-be- listed companies.It had also recommended imposition of fees for various services offered by Sebi, except for handling investor complaints. Besides, fees charged for consent settlement and informal guidance were proposed to be hiked.
Sebi said its board has approved the upward revision of fees while ensuring minimal impact on investors.“The same will be notified through appropriate circulars to be issued in due course,” it added.According to sources, the fee hike has been proposed by CRFR for brokers, stock exchanges and mutual funds, among others, as also the charges for various offer documents and for takeovers.
Sebi further said that its budget for the financial year 2014-15 has been prepared keeping in view the need to place greater emphasis to achieve the mandated statutory objectives.The board also identified four core areas for Sebi’s activities in 2014-15.These include strengthening the investor awareness and education measures, enlarging reach amongst investors through regional and local offices, enhanced focus on capacity building, and raising standards of supervision and enforcement functions in market place such as strengthening market surveillance and investigation functions.
The efforts on capacity building front would include hiring of additional staff and providing necessary training to meet the ever-changing challenges faced by Sebi.This follows a call by Prime Minister Prime Minister Manmohan Singh that Sebi needs to “constantly upgrade and improve”, especially in the wake of number of entities that it needs to regulate continues to go up. The fee hike is aimed at helping Sebi generate resources for its regulatory and investor-centric activities, as a slump in capital markets has adversely impacted its finances.
The proposed revision includes pushing back the fees to the level seen before a reduction was announced in 2009 for some intermediaries.The CRFR submitted its report to Sebi earlier this month after detailed discussions and a “thorough study” of various parameters.With many of Sebi orders getting challenged in tribunal and courts, the panel has also suggested recovery of legal expenses incurred in such litigations from penalties imposed by the regulator on defaulters before crediting the same to the government’s coffers.
The regulator has incurred litigation expenditure in the range of Rs4-5 crore in each of the past three financial years, while such expenses could be even higher in the current fiscal ending this month.The CRFR panel had also suggested charging ‘processing fees’ for various service requests from companies, stock exchanges and market intermediaries, as many of such services are being provided for free despite significant costs incurred by the regulator in such matters.
With regard to the services proposed to be charged by Sebi, the panel had suggested Rs50,000 fee for permission to set up Wholly Owned Subsidiary Abroad, and Rs10,000 each for requests such as change of custodian, change in registered office or name and change in managing director.
As per Sebi estimates, the regulator’s operational income (fees from intermediaries) is expected to be about Rs165 crore in the current fiscal - ending March 31 - and at about Rs196 crore in 2014-15.However, a revision in fee structure as per CRFR recommendations can boost Sebi’s operational income to Rs378 crore in 2014-15.At the current rates, Sebi is expected to post a deficit of Rs 66 crore on operational account in 2013-14, while the gap can further increase to about Rs85 crore in next fiscal.
However, a revision in fees can help Sebi post a surplus of about Rs98 crore in the next fiscal 2014-15.Before the CRFR review, Sebi’s total income for 2014-15 is estimated at Rs372 crore, which would include Rs196 crore as fees from intermediaries, Rs158 crore as income from investments and about Rs18 crore as miscellaneous income.
With the adoption of CRFR recommendations, the total estimated income may rise to Rs 554 crore on account of an increase in fee income.