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NEW DELHI: The board of Securities and Exchange Board of India is likely to discuss next week a stricter framework for fiduciaries in the securities market, including auditors and valuers, according to a senior official.
In July, the regulator issued a consultative paper on the proposed Sebi (Fiduciaries in the Securities Market) (Amendment) Regulations for public consultations.
The proposal is likely to be taken up at Sebi’s board meeting next week, the official said.
The amended norms would be applicable for entities that undertake third-party fiduciary duties, assignments and engagements under the securities law.
While the chartered accountants’ apex body ICAI has raised strong objections to considering auditors as fiduciaries, the watchdog has maintained that it is empowered to exercise jurisdiction over persons associated with the securities market, the official said.
Once the amendments are in place, Sebi would have more powers to take action against fiduciaries in case they have submitted false certificates, reports or violated regulations.
Action could also initiated against a fiduciary’s engagement partner or director, the official added.
Entities such as merchant bankers, rating agencies, custodians, debenture trustees and registrar to public issues are registered with Sebi.
However, some other fiduciaries like practising chartered accountants and company secretaries, cost accountants, valuers and monitoring agencies are not registered with it.
Under the norms for fiduciaries proposed by Sebi, defaulters would face stringent penal actions, including ban from securities markets and disgorgement of fees.
Those found guilty of providing wrong audit or valuation reports would have to cough up any unlawful gains they might have made in the process, as per the proposals.
It also comes against the backdrop of the role of auditors and valuers coming under the regulatory scanner in a number of cases, involving financial misdoings.
A high-level panel on corporate governance, headed by eminent banker Uday Kotak, had suggested that the Sebi should have clear powers to act against auditors and other third-party fiduciaries with statutory duties in case of frauds as well as gross negligence.
Issuing the consultation paper, Sebi had said that it is already empowered to issue directions to any person associated with the securities market (including fiduciaries), in the interest of investors or for its orderly development.
Since these fiduciaries are not specifically registered with the regulator or regulated by it under any regulation, there may be a need to clarify and specify the actions that may be taken by Sebi against such fiduciaries in case they submit false reports or certificates.
