– Sumit Agrawal & Vaneesa Agrawal.The Union Budget 2017 has brought about some major changes for the capital markets. We look at the most important ones in this article..1. Deepening of the Commodities Market.In the Union Budget of 2015-16, the Government had announced the merger of the Securities & Exchange Board of India (SEBI) and the Forward Market Commission (FMC). Since the merger in September 2015, SEBI has been regulating the commodities market as well..In this budget, Finance Minister Arun Jaitley has announced that the commodities and securities derivative markets will be further integrated by integrating the participants, brokers, and operational frameworks. The Government has also emphasized that the commodities markets require further reforms for the benefits of farmers..An expert committee will be constituted to study and promote the creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading. e-NAM (Electronic National Agriculture Market) would be an integral part of such framework..2. Illegal Deposit Schemes – Part of ‘Clean India’ Agenda.The Finance Minister had earlier proposed to bring a comprehensive central legislation to deal with unauthorized deposit taking schemes. The Finance Ministry had soon thereafter sought public feedback on the draft Banning of Unregulated Deposit Schemes and Protection of Depositors’ Interest Bill, 2016. Based on the public feedback, version 2.0 was issued in November 2016..The Finance Minister has announced that the draft bill will be introduced shortly after its finalization. He highlighted in his speech that there is an urgent need to protect poor and gullible investors from another set of dubious schemes, operated by unscrupulous entities who exploit the regulatory gaps in the Multi State Cooperative Societies Act, 2002..3. Insolvency & Bankruptcy Code – Part II.In the Budget 2016-17, it was announced that the Code for Resolution of Financial Firms, together with the Insolvency and Bankruptcy Code, will provide a comprehensive resolution mechanism for our economy. Having taken care of the Insolvency and Bankruptcy Code this year, the next step forward is announced as under:.“The bill relating to resolution of financial firms will be introduced in the current Budget Session of Parliament. This will contribute to stability and resilience of our financial system. It will also protect the consumers of various financial institutions. Together with the Insolvency and Bankruptcy Code, a resolution mechanism for financial firms will ensure comprehensiveness of the resolution system in our country.”.4. Streamlining Tribunals.The Government of India has been facing difficulties to find suitable people to man various expert regulatory Tribunals. For example, Telecom Disputes Settlement and Appellate Tribunal (TDSAT) is still headless after Justice Aftab Alam retired in June 2016. On the other hand, Competition Appellate Tribunal (COMPAT) is also suffering since its Chairman Justice GS Singhvi retired recently in December..In the last budget, the Finance Minister had announced increasing benches of the Securities Appellate Tribunal (SAT), a proposal which is yet to see the light of day. Mushrooming of Tribunals was an issue also highlighted by Law Commission of India’s Report No. 232 while dealing with the issue of uniformity in retirement age of chairpersons and members of tribunals..In this budget, it has been announced that, “over the years, the number of tribunals have multiplied with overlapping functions. We propose to rationalise the number of tribunals and merge tribunals wherever appropriate.”.5. Ease of Doing Business.The budget has also announced a number of steps to for promoting ease of doing business in the financial markets, enhancing operational flexibility and ease of access to Indian capital markets. These measures include:.The process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI.A common application form for registration, opening of bank and demat accounts, and issue of PAN will be introduced for Foreign Portfolio Investors (FPIs). SEBI, RBI and CBDT will jointly put in place the necessary systems and procedures. This will greatly enhance operational flexibility and ease of access to Indian capital markets.Steps will be taken for linking of individual demat accounts with Aadhar..6. Boost to Primary Markets.This budget has also introduced measures which will definitely give a boost to the primary markets and channelize more investment. Presently, institutions such as banks and insurance companies are categorised as Qualified Institutional Buyers (QIBs) by SEBI. They are eligible for participation in IPOs with specifically earmarked allocations. It is proposed in this budget to allow systemically important NBFCs regulated by RBI and above a certain net worth, to be categorized as QIBs..Furthermore, listing and trading of Security Receipts issued by a securitisation company or a reconstruction company under the SARFAESI Act will be permitted in SEBI registered stock exchanges. This will enhance capital flow into the securitisation industry and will particularly be helpful to deal with bank NPAs..The Government has also announced its intention to list Public Sector Enterprises. It will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock exchanges..7. Telecom Sector .The Department of Telecom, along with Telecom Regulatory Authority of India (TRAI), will have a lot of work on its plate, as the Finance Minister announced a DigiGaon initiative. This initiative will be launched to provide telemedicine, education and skills through digital technology..The Finance Minister has also announced that under the BharatNet Project, Optical Fiber Cable has been laid for 1,55,000 kms. He has stepped up the allocation for BharatNet Project to Rs. 10,000 crores in 2017-18. By the end of 2017-18, high speed broadband connectivity on optical fibre will be available in more than 1,50,000 gram panchayats, with Wifi hot spots and access to digital services at low tariffs..Conclusion.It is a good budget as it focuses on making financial markets better regulated and also introduces measures to strengthen the same. For lawyers, it indicates what sectors could be fee earners in the year to come..It is said that law and finance creates the best synergy, and the 2017-18 budget certainly displays so. The Bar and the Bench will have a significant role to play in the Indian economy..Sumit Agrawal and Vaneesa Agrawal are Partners at Suvan Law Advisors, a Mumbai-based law firm.
– Sumit Agrawal & Vaneesa Agrawal.The Union Budget 2017 has brought about some major changes for the capital markets. We look at the most important ones in this article..1. Deepening of the Commodities Market.In the Union Budget of 2015-16, the Government had announced the merger of the Securities & Exchange Board of India (SEBI) and the Forward Market Commission (FMC). Since the merger in September 2015, SEBI has been regulating the commodities market as well..In this budget, Finance Minister Arun Jaitley has announced that the commodities and securities derivative markets will be further integrated by integrating the participants, brokers, and operational frameworks. The Government has also emphasized that the commodities markets require further reforms for the benefits of farmers..An expert committee will be constituted to study and promote the creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading. e-NAM (Electronic National Agriculture Market) would be an integral part of such framework..2. Illegal Deposit Schemes – Part of ‘Clean India’ Agenda.The Finance Minister had earlier proposed to bring a comprehensive central legislation to deal with unauthorized deposit taking schemes. The Finance Ministry had soon thereafter sought public feedback on the draft Banning of Unregulated Deposit Schemes and Protection of Depositors’ Interest Bill, 2016. Based on the public feedback, version 2.0 was issued in November 2016..The Finance Minister has announced that the draft bill will be introduced shortly after its finalization. He highlighted in his speech that there is an urgent need to protect poor and gullible investors from another set of dubious schemes, operated by unscrupulous entities who exploit the regulatory gaps in the Multi State Cooperative Societies Act, 2002..3. Insolvency & Bankruptcy Code – Part II.In the Budget 2016-17, it was announced that the Code for Resolution of Financial Firms, together with the Insolvency and Bankruptcy Code, will provide a comprehensive resolution mechanism for our economy. Having taken care of the Insolvency and Bankruptcy Code this year, the next step forward is announced as under:.“The bill relating to resolution of financial firms will be introduced in the current Budget Session of Parliament. This will contribute to stability and resilience of our financial system. It will also protect the consumers of various financial institutions. Together with the Insolvency and Bankruptcy Code, a resolution mechanism for financial firms will ensure comprehensiveness of the resolution system in our country.”.4. Streamlining Tribunals.The Government of India has been facing difficulties to find suitable people to man various expert regulatory Tribunals. For example, Telecom Disputes Settlement and Appellate Tribunal (TDSAT) is still headless after Justice Aftab Alam retired in June 2016. On the other hand, Competition Appellate Tribunal (COMPAT) is also suffering since its Chairman Justice GS Singhvi retired recently in December..In the last budget, the Finance Minister had announced increasing benches of the Securities Appellate Tribunal (SAT), a proposal which is yet to see the light of day. Mushrooming of Tribunals was an issue also highlighted by Law Commission of India’s Report No. 232 while dealing with the issue of uniformity in retirement age of chairpersons and members of tribunals..In this budget, it has been announced that, “over the years, the number of tribunals have multiplied with overlapping functions. We propose to rationalise the number of tribunals and merge tribunals wherever appropriate.”.5. Ease of Doing Business.The budget has also announced a number of steps to for promoting ease of doing business in the financial markets, enhancing operational flexibility and ease of access to Indian capital markets. These measures include:.The process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI.A common application form for registration, opening of bank and demat accounts, and issue of PAN will be introduced for Foreign Portfolio Investors (FPIs). SEBI, RBI and CBDT will jointly put in place the necessary systems and procedures. This will greatly enhance operational flexibility and ease of access to Indian capital markets.Steps will be taken for linking of individual demat accounts with Aadhar..6. Boost to Primary Markets.This budget has also introduced measures which will definitely give a boost to the primary markets and channelize more investment. Presently, institutions such as banks and insurance companies are categorised as Qualified Institutional Buyers (QIBs) by SEBI. They are eligible for participation in IPOs with specifically earmarked allocations. It is proposed in this budget to allow systemically important NBFCs regulated by RBI and above a certain net worth, to be categorized as QIBs..Furthermore, listing and trading of Security Receipts issued by a securitisation company or a reconstruction company under the SARFAESI Act will be permitted in SEBI registered stock exchanges. This will enhance capital flow into the securitisation industry and will particularly be helpful to deal with bank NPAs..The Government has also announced its intention to list Public Sector Enterprises. It will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock exchanges..7. Telecom Sector .The Department of Telecom, along with Telecom Regulatory Authority of India (TRAI), will have a lot of work on its plate, as the Finance Minister announced a DigiGaon initiative. This initiative will be launched to provide telemedicine, education and skills through digital technology..The Finance Minister has also announced that under the BharatNet Project, Optical Fiber Cable has been laid for 1,55,000 kms. He has stepped up the allocation for BharatNet Project to Rs. 10,000 crores in 2017-18. By the end of 2017-18, high speed broadband connectivity on optical fibre will be available in more than 1,50,000 gram panchayats, with Wifi hot spots and access to digital services at low tariffs..Conclusion.It is a good budget as it focuses on making financial markets better regulated and also introduces measures to strengthen the same. For lawyers, it indicates what sectors could be fee earners in the year to come..It is said that law and finance creates the best synergy, and the 2017-18 budget certainly displays so. The Bar and the Bench will have a significant role to play in the Indian economy..Sumit Agrawal and Vaneesa Agrawal are Partners at Suvan Law Advisors, a Mumbai-based law firm.
