A Regulatory agency is a public authority or government agency responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity. Regulatory Agencies are either set up under a statute or derive their powers from a statute and the rules laid thereunder.

For instance, Reserve Bank of India (RBI), which is the Central Bank of India, is set up under the Reserve Bank of India Act, 1934 wherein its constitution, management, banking related powers and functions are laid down. Further, RBI also derives certain additional powers related to foreign exchange (Foreign Direct Investment and Overseas Direct Investment) under the Foreign Exchange Management Act, 1999.

The primary role of Regulatory agencies are as follows:

  • To prevent market failure;
  • To check anti-competitive practices; and
  • To promote the public interest.

As the regulations that the Regulatory Authorities adopt have the force of law, part of these agencies’ function is essentially legislative. As some of the Regulatory Authorities also conduct hearings and pass judgments concerning adherence to their regulations, they also exercise a judicial function.

For example, Securities and Exchange Board of India Act, 1992 has set up Securities and Exchange Board of India (SEBI) which is the regulator of securities market in India. SEBI formulates regulations for the capital market and it also adjudicates disputes. The Competition Commission of India (CCI) is set up under the Competition Act, 2000 and it ensures that there is no abuse of dominance of an organization in the market and that there is a level playing field. It prohibits agreements entered into between organisations which are anti-competitive in nature which could hamper the growth in the market. Further, CCI is a quasi-judicial body which adjudicates disputes pertaining to anti-competition.

Regulatory agencies are broadly of two types: General Regulatory Authorities and Special Regulatory Authorities. The distinction is on the basis of the ambit and scope of their functions. With regards to functioning of companies, the types of authorities can be understood as follows:

  • The Registrar of Companies (ROC) which deals with the company related matters, is a General Authority;
  • Whereas the following are Special Authorities:

1. SEBI which amongst other things, specifically regulates the functioning of the listed companies;

2. Reserve Bank of India (RBI) specifically deals with the working of banking companies, financial institutions and Non-Banking Financial Companies (NBFCs);

3. Insurance Regulatory and Development Authority of India (IRDAI), an autonomous apex statutory body which regulates and develops the insurance industry in India.

By virtue of the powers vested in the Regulatory agencies under the statute, the task of certification and granting of licenses is also carried out by the authorities themselves or assigned to other officers.

A Licensing authority is a competent authority which grants a license to exercise certain privilege that, without such authorization, would constitute an illegal act. The term Certifying Authority has been prescribed in the Information Technology Act, 2000. It lays down that a Certifying Authority means a person who has been granted a licence to issue Digital Signature Certificates (DSCs).  Information Technology (Certifying Authorities) Rules, 2000 specifically deal with the duties and powers of these Certifying Authorities. A Controller appointed by the government, supervises the Certifying Authorities.

Therefore, on the basis of the nature of the business and the statute governing the industry, the entity will be governed by various Regulatory agencies. Some examples are given below:

1. The banks are governed by the Banking Regulation Act, 1949 and RBI is the primary regulator. Moreover, a bank whose shares are listed on the Stock Exchange are also regulated by SEBI. Issues related to insolvency and non-performing assets are addressed by the Insolvency and Bankruptcy Board of India (IBBI).

2. Telecom Regulatory Authority of India (TRAI) is the regulator for the telecommunications sector in India. TRAI is charged with ensuring the orderly growth of the telecom sector while protecting the interests of both telecom service providers and consumers. Under the Indian Telegraph Act, 1885, the Central Government is the exclusive authority for establishing, maintaining and working telegraph and wireless telegraphy equipment and has the authority to grant licenses for such activities.

3. Food Safety and Standards Authority of India (FSSAI) is the regulator responsible for protecting and promoting public health through the regulation and supervision of food safety. Under the Food Safety and Standards (Licensing and Registration of Food Businesses), Regulations 2011, Central and State Licensing Authorities are appointed. License for commencing or carrying on food business shall be granted by the Licensing Authority.

4. Central Drug Standard Control Organization (CDSCO), established under the Drugs and Cosmetics Act, 1940, is the regulatory authority which regulates the drugs and cosmetics industry in India. The Bureau of Indian Standards (BIS) issues standards for ingredient usage in cosmetics. Whereas, for the sale of drugs in India, the licensing authority is the State Drug License Authority (SDLA).

This can be summarised in the following manner:

REGULATORY AUTHORITY LICENSING AUTHORITY CERTIFYING AUTHORITY
  •  A Regulatory agency is a public authority or government agency responsible for exercising autonomous authority over some area of business activity in a regulatory or supervisory capacity. The role of Regulatory agencies includes:

i.Prevention of market failure;

ii. Checking anti-competitive practices; and

iii. Promotion of public interest.

Sometimes, Regulatory agency also have legislative and quasi-judicial powers.

By virtue of the powers vested in the Regulatory agencies under the statute, the task of granting of licences is carried out by the authorities either themselves or it is assigned to other officers.

A Licensing authority is a competent authority which grants a license to exercise certain privilege that, without such authorization, would constitute an illegal act.

  • A Certifying agency is an authority which by the virtue of powers vested to it under a Statute or Rules laid thereunder, issues certificates evidencing registration, compliance of laws, etc.
EXAMPLES OF SUCH AUTHORITIES
A Regulatory agency can be a general authority like the RBI, SEBI and Directorate General of Foreign Trade (DGFT); and special authority like IRDA, TRAI and FSSAI. Under the Indian Telegraph Act, 1885, the Central Government is the exclusive authority to grant licenses for telegraph and wireless telegraphy equipment. Under the Information Technology Act, 2000, a Certifying Authority means a person who has been granted a licence to issue Digital Signature Certificates (DSCs).
HORIZONTAL EXAMPLES
FSSAI is the regulator responsible for protecting and promoting public health through the regulation and supervision of food safety. Under the Food Safety and Standards (Licensing and Registration of Food Businesses), Regulations 2011, Central and State Licensing Authorities are appointed.
  • The prescribed officer (Labour Officer or the Municipal Corporation) on satisfaction with the registration application issues ‘Registration Certificate’ under the Shops and Establishment Act.
Central Drug Standard Control Organization (CDSCO), established under the Drugs and Cosmetics Act, 1940, is the regulatory authority which regulates the drugs and cosmetics industry in India. For the sale of drugs in India, the licensing authority is the State Drug License Authority (SDLA). Local Municipal Authorities issue ‘Occupation Certificate’ (OC) which certifies the construction of the building.
IRDA is a regulatory agency which promotes, regulates and ensures orderly growth of the insurance sector across India. IRDA also issues licences to insurance agents by virtue of the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulations, 2000. The Appropriate Government (Central or State) issues a Certificate of Registration to every establishment which proposes to employ contract workers for its work.

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