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In a first, the government is considering a revamp of the legal system by giving more powers and responsibilities to the Securities Appellate Tribunal (SAT), a quasi-judicial body, which currently only settles disputes in capital market transactions. The thinking within the government is that SAT’s role needs to be widened and should deal with appeals against insurance and pension regulators, as well, any other regulatory authority in the financial markets.

Considering its potential to play a larger role as an arbitral tribunal, it may sport a new name — Financial Services Appellate Tribunal or FSAT — and would have its headquarters in Mumbai. In other words, FSAT will be empowered to hear appeals against orders passed by the Insurance Regulatory and Development Authority (IRDA) and the Pension Fund Regulatory and Development Authority (PFRDA), besides the Securities and Exchange Board of India (Sebi).

The single tribunal is proposed to have one presiding officer and about half a dozen regulatory members, of them, two shall be judicial members, it would set up benches at different locations in the country with at least two members. A few weeks ago, the Sebi board, which has representatives from the Reserve Bank of India, ministry of finance, corporate affairs ministry among others, had discussed the proposal and has referred it to the government.

As the proposed policy may have some bearing on other regulators, it has recommended that the government to consult RBI and other regulators before taking a final call on the same. Both IRDA and PFRDA senior officials told ET that they are in favour of the proposed policy.

The concept of a common arbitral tribunal for financial markets was mooted by the high powered expert committee in their report on making Mumbai an international financial centre. The report noted that in a finance setting with independent regulators, an appeal mechanism is required for all action of the regulator. However, the system lacks sophistication as well as specialised domain knowledge.

Besides, the legal process stretches on for months, and some times, even years. At any given point of time, there are umpteen number of pending cases. India, which currently has a fragmented regulatory architecture, seems to be taking a page out of the UK’s book, which has integrated financial regulation under a single head. Earlier, it, too, was undertaken by separate agencies.

If the system is overhauled, it will spell good news for aggrieved parties as they would get a platform to appeal against regulator’s order. At present, the plaintiff can challenge Sebi’s order at SAT. This is not the case when it comes to other regulators as the party is left with little option but to approach the high court. Another advantage is that a common tribunal, with specialised expertise on the financial markets, would streamline workflow leading to minimal delays.

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June 2024