Financial sector Legislative Reforms 2013
The Financial industry Legislative Reforms Committee (FSLRC), which was established two years ago to update and examine outmoded financial industry rules, gave its final report to the Finance Ministry in March 2013. The Committee has proposed many solutions to safeguard consumers from misselling and fraud. It also proposed plans for the growth of India’s financial industry.
The Financial Sector Legislative Reforms Commission (FSLRC) is a commission established by the Government of India’s Ministry of Finance on March 24, 2011, to examine and rebuild the Indian financial sector’s legislative and institutional framework. This Commission is led by Justice B. N. Srikrishna, a former Supreme Court of India judge, and is made up of a diverse group of experts from finance, economics, public administration, and law.
Based on substantive research, extensive deliberations in the Commission and its Working Groups, and consultation with policymakers, regulators, experts, and stakeholders, the Commission has developed a preliminary framework for the legal-institutional structure required for the Indian financial sector in the medium to long term. The fundamental contours of the framework are defined in the report issued by the Commission on October 4, 2012.
Based on further comments from stakeholders and subsequent discussions, the FSLRC recommends completing its Report by March 2013.
The purpose of formation
The FSLRC was established after most legal and institutional institutions in India’s financial industry had been in place for more than a century. Many financial sector legislation date back many decades, when the financial world was very different from what we see today.
The financial industry is governed by over 61 Acts, as well as a variety of rules and regulations. For example, the SEBI (Securities and Exchange Board of India) Act does not empower the regulator to arrest anybody, but it does mandate severe penalties for all market-related offenses. The Reserve Bank of India (RBI) Act and the Insurance Act are from 1934 and 1938, respectively.The Commission was founded to analyze and rewrite these outdated legislation to meet the needs of today’s financial industry. FSLRC intends to repeal 25 of the existing 61 legislation that regulate the financial industry and change several others.
Objectives
The Commission’s Terms of Reference include the following:
Examining the architecture of the legal and regulatory structure that governs India’s financial sector
Examine whether legislation should need a declaration of the principles of legislative intent underlying each item of subordinate legislation in order to make the legislation’s purpose apparent and visible to law users and the courts.
Examine whether public comment on draft subordinate legislation should be made obligatory, with the exception of emergency measures.
Examine the parameters for using emergency powers and taking regulatory action ex parte.
Examine how FEMA and FDI Policy exchange regulations interact with other financial regulatory regimes.
Examine the most acceptable methods of supervision for regulators and their independence from the government.
Examine the necessity for a re-statement of the law and the prompt repeal of any out-of-date laws in light of court rulings and policy movements in the financial industry during the previous two decades after deregulation.
Examination of data privacy and consumer protection problems in the Indian financial services business.
Examination and efficacy of laws governing the use of information technology in the delivery of financial services in India.
Examination of all previous suggestions made by different expert committees established by the government and regulators, as well as the implementation of actions that are readily acceptable.
Examine how state governments and legislatures contribute to India’s seamless interstate financial services infrastructure.
Examination of any other relevant concerns.
Consumer protection.
According to the FSLRC, all financial rules and regulations are designed to safeguard consumers’ interests. As a result, it is proposed that a specific forum for consumer redress be established, as well as precise procedures for protecting unsuspecting clients from mis-selling and scamming via tiny print.
The FSLRC study outlines several fundamental rights for all financial customers. The research recommends further safeguards for non-professional investors. The Commission has proposed several changes to current laws and new legislation. These adjustments will need to be properly implemented.
Consumers would expect certain fundamental safeguards, such as financial service providers acting with due diligence. It is critical to safeguard investors against unfair contract terms, unethical behavior, and the protection of personal information. The FSLRC study also calls for fair disclosure and resolution of investor concerns by financial service providers.
Financial Regulatory Architecture Act
The planned regulatory system would be overseen by the Financial Regulatory Architecture Act, which will provide a standardized legal procedure for financial regulators. The finance ministry will unify the regulatory system before modifying the legislative structure. The report may take two years to execute in a gradual approach.