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The Hindu
2 days ago
- Business
- The Hindu
Consultative regulation-making that should go further
In May this year, the Reserve Bank of India (RBI) issued a policy framework for how it will publish regulations, directions, guidelines and notifications. This follows a similar move by the Securities and Exchange Board of India (SEBI), in February, which published regulations setting out the procedure it would follow to issue regulations. Regulators such as the Reserve Bank of India (RBI) and SEBI, have been created by Acts of Parliament and have quasi-legislative powers. Within this context, strong procedural safeguards and robust checks and balances are essential to uphold the rule of law. The recent frameworks, which outline the procedures that the RBI and SEBI must follow when making law, are a welcome start. When proposing any new regulations or amendment to existing regulations, the RBI will now conduct 'impact analyses' and SEBI will state the 'regulatory intent and objectives'. Both regulators will also invite public comments for 21 days. Moreover, they will now periodically review their own regulations. These reforms signal a welcome shift toward more transparent and consultative regulation-making. Yet, they can, and should go further. Two additions will make these processes more robust, and ensure greater transparency and accountability. First, regulators should clearly identify the economic rationale for their interventions, and second, they should institute mechanisms to ensure accountability for periodic reviews and responses to public comments. The issue of market failure The RBI's impact analyses and SEBI's statements of objectives must be grounded in economic rationale that identifies the problem that their proposed regulation will address. In 2013, the Financial Sector Legislative Reforms Commission (FSLRC) emphasised that 'laws must be defined in terms of their economic purpose'. Regulatory practices in other jurisdictions also support the FSLRC's suggestion. For example, executive memoranda in the United States mandate that regulators undertake a cost-benefit analysis before proposing or adopting a regulation. Regulators there must also ensure the 'least burden on society', adopt an approach that maximises benefits, and assess the feasibility of alternatives to direct regulation. As another example, under the European Union's Better Regulation Framework, impact assessments involve identifying the problem, potential solutions and their impact, and mechanism for monitoring and evaluating the results. Currently, RBI's framework calls for 'impact analysis' considering 'economic environments'. SEBI must explain its objectives. However, neither are explicitly required to provide the economic rationale of any proposed regulation or identify the underlying market failure. This can be contrasted with the framework implemented by the International Financial Services Centres Authority (IFSCA), which must state the issue that its proposed regulation seeks to address. Financial sector regulators such as the RBI and SEBI should: identify the market failure that necessitates regulatory intervention; demonstrate how the proposed regulation will address such failure; conduct a cost-benefit analysis to demonstrate the expected impact of the proposed regulation, and formulate a monitoring and evaluation framework to assess the impact of the regulation. Strengthening accountability The track records of the regulators in consultative regulation-making are not encouraging. It was found by two researchers that between June 2014 and July 2015, the RBI had sought public comments on 2.4% of its circulars while SEBI had done the same on less than half of its regulations. Even though this suggests that there are limited opportunities for stakeholders to submit their views on proposed regulation, one is optimistic that this will now change. However, the regulators must be transparent in their approaches toward consultative regulation-making. The reporting of the following information on an annual basis will strengthen accountability: the number of public consultations vis-à-vis the number of proposed regulations or amendments; responses received; suggestions that have been accepted and rejected; rationale for acceptance and rejection; the impact of public feedback on the proposed regulation or amendment, and, finally, all associated timelines. This is by no means an exhaustive list. Some of this information can be found in the agendas for SEBI's board meetings. But typically, as in SEBI's latest board meeting, the summary of public comments is 'excised for reasons of confidentiality'. In addition, the RBI and SEBI must define the intervals at which they will review their regulations. This is relevant in the context of promises toward deregulation. Once again, this is may be contrasted with the IFSCA's framework, which mandates a review every three years. Regulators should, at pre-defined and reasonably frequent intervals, assess whether current regulations are achieving their intended objectives and addressing the problems they were designed to solve. A hurdle Good regulatory practice warrants meaningful justification for regulatory intervention, and the RBI and SEBI have taken the initial steps in that direction. Notably, limited state capacity is a significant hurdle to implementing regulatory impact assessments and consultative practices. Moreover, piecemeal reforms by individual regulators may not be sufficient to ensure consistent adherence to good regulatory practice. Parliament could contemplate enactment of a law, similar to the Administrative Procedure Act in the United States, with standardised procedures for regulation-making, which includes impact analysis, public consultation and periodic review. The United Kingdom and Canada have issued guidelines for regulation-making by agencies. Such an approach would institutionalise transparency and accountability for all regulators in India. Natasha Aggarwal is a Senior Research Fellow at TrustBridge Rule of Law Foundation. The views expressed are personal
Yahoo
06-05-2025
- Business
- Yahoo
Once again, the Government is being reckless with people's money
The Government's financial illiteracy is glaring, almost breathtaking in its scope. It is, sadly, the hallmark of socialist administrations – an undisciplined, reflexive habit of spending without any real understanding of where the money will come from. These governments are often blind to the fact that real wealth creation, the kind that drives a flourishing economy, depends on a thriving private sector. Instead, when the economy starts to stutter, they scramble to plug the gaps. What follows is a grotesque mix of ignorance, panic and, eventually, a full-on retreat into the only playbook they know: state-sponsored kleptocracy. The one consolation in the UK is that our kleptocrats are housed in Whitehall, not in the pockets of oligarchs with private armies. This current administration has gleaned a few lessons from the mistakes of its predecessors – chiefly that a strong economy is a non-negotiable necessity. As Paul Krugman, the Nobel Prize-winning economist, put it: 'Productivity isn't everything, but in the long run, it is almost everything.' And yet, for all its fine words about a strong economy, the Government seems woefully short on the means to achieve the very productivity gains they know are critical. Then, there are the regulators – an ever-present feature of any socialist government. Armed with the powers bestowed upon them by misguided, over-elaborate, ill thought-out Acts of Parliament, it feels as though they make rules not to solve problems, but simply to appear as if they are doing something. And in their zeal to regulate, they wreak havoc on the private sector, ignoring the real-world consequences of their actions. The saga of the FSA and FCA since the Financial Services and Markets Act of 2000 is a case in point. When regulators run riot, the results are nothing short of disastrous as they have been for the London Stock Market in terms of shrinking capitalisation since 1997. Consider the downfall of Woodford Investment Management. The FCA, in its infinite wisdom, accused Neil Woodford of failing to manage liquidity in his fund – a claim that ultimately led to the fund's collapse. The story is a classic case of regulatory overreach. Initially, Woodford's fund held around 10 per cent in private long term investments. But as large withdrawals drained the fund, it was forced to sell off its more liquid assets, leaving the illiquid ones behind. This skewed the fund's liquidity balance, but it was the FCA's interpretation of the FSMA 2000 rules hand in glove with the fund's administrator, Link Fund Solutions, that triggered the suspension. Investors saw their losses crystallised and money disappear, and Woodford, furious, described Link Fund Solutions' decision to liquidate as one that 'I cannot accept, nor believe is in the long-term interests of investors.' The real victims here, of course, were the investors, who saw their capital evaporate thanks to the regulatory juggernaut that couldn't see beyond its own rules. Now, in an ironic twist, this Government – so quick to legislate with little thought for the consequences – is pushing through plans that would force pension funds to allocate 10 per cent of their portfolios to private, illiquid investments under the so-called Mansion House reforms. These funds, remember, are not government money – they belong to individual savers. Pension companies are legally obligated to act in the best interests of those savers, not to prop up a failing economy. This is not theft, but investors should certainly be cautious. If pension fund managers are no longer prioritising their clients' interests, that's a red flag. The Government, it seems, is in direct conflict with the principles laid out by previous administrations – principles that were designed to protect investors. FCA Principle 6, for example, states that firms must pay 'due regard to the interests of their customers and treat them fairly.' It's a simple, yet vital rule: businesses must act in the best interests of their clients. The real question is, when will they learn that real prosperity comes not from the state's intervention, but from a flourishing, free market? Communism's failure to deliver through flawed central planning and a disregard for the power of individual entrepreneurs should be a recent example of the failure of statist diktat. History is littered with them. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
The Hindu
06-05-2025
- Business
- The Hindu
MIT-WPU School of Economics and Commerce launches B.Com Financial Analysis Program
The MIT World Peace University (MIT-WPU) has launched its new Financial Analysis program, with the CFA Institute delegation in attendance. The ceremony highlighted collaborative plans to integrate financial curriculum into the university's academic programs. This aims to equip students with the skills required for successful careers in the global finance sector. Under the newly launched Financial Analysis program, MIT-WPU will offer on-campus training for the CFA Level I and II examinations, integrating them directly into the curriculum. In the first year, students will also have the opportunity to pursue the Investment Foundations Certificate from CFA Institute. This certificate will provide them with an understanding of the investment industry, including its structure, core concepts, and ethical considerations. Dr. R. M. Chitnis, Vice Chancellor, MIT-WPU, said, 'CA, CS, and CMA are professional courses in India, focused on auditing, taxation, and legal compliance, authorised under Acts of Parliament. In contrast, the CFA is a global qualification that supports companies in finance and investment banking, representing a distinct domain. Students who pursue these professional degrees alongside the CFA qualification will gain a significant competitive advantage in the fast-evolving world of finance.' Dr. Anjali Sane, Dean of the School of Economics and Commerce at MIT-WPU, said, ' With the launch of the Financial Analysis program, we had the opportunity to engage in insightful discussions on emerging trends in the investment industry. Our focus has been on building a curriculum that meets global industry standards and empowers students with the skills needed to thrive in the world of finance.'
Yahoo
04-04-2025
- Politics
- Yahoo
In defence of the UK Supreme Court
The Constitutional Reform Act 2005, one of the flagship statutes of the Blair government, was passed almost exactly twenty years ago. Among other things, it abolished the Appellate Committee of the House of Lords and replaced it with a new court of final appeal for the United Kingdom to be called the Supreme Court. The change was largely cosmetic. It was designed to correct the constitutional anomaly that the highest court of the land was nominally a committee of the legislature. In the British constitution it is quite common to find that the label is no guide to the contents of the bottle. But everyone who cared to know realised that the Appellate Committee was actually a proper court whose judicial functions were quite distinct from everything else that happened in the building. The Supreme Court is institutionally and physically separate from the House of Lords, but otherwise it is exactly the same as the old Appellate Committee. The three main differences between the Supreme Court and the Law Lords have all been wholly positive. First, its judges are chosen on merit by a non-political commission. There is therefore no danger of the selection process being used to politicise the Court, as has happened in the United States. Secondly, the Supreme Court is more deliberative and collegiate than its predecessor. The result has been a higher quality of judgements, more coherent and more useful as explanations of the law. Thirdly, the Court has a closer engagement with the public whom it serves. Brief explanations of each decision in non-technical language are given when the judgements are handed down. Nevertheless, the Supreme Court has proved to be surprisingly controversial in some quarters, and notably on the right. This is mainly due to the two Gina Miller decisions. They were significant interventions in the prolonged constitutional crisis generated by the decision to leave the European Union. Many leavers condemned them without any evidence as politically motivated decisions by judicial remainers trying to sabotage Brexit. The Johnson government at one stage toyed with the idea of abolishing it. The former UKIP MP Douglas Carswell recently called in this newspaper for the Law Lords to be restored. The Court's critics seem to have been misled by its name. They think that it is a British version of the US Supreme Court which can override Acts of Congress. In fact the Supreme Court has no power to override Acts of Parliament, any more than the Law Lords did, although both courts were required by statute to give overriding effect to EU law while we were members of the European Community. Far from undermining the constitutional authority of Parliament, the Supreme Court has consistently defended it. In the first Gina Miller case, it decided that Theresa May could not give notice to leave the European Union without Parliamentary approval. In the second one it decided that Boris Johnson could not prorogue Parliament whenever it suited him. Both decisions involved fundamental issues of constitutional law which had to be decided by a court. Since then, the Supreme Court has held in two landmark cases that where considerations of social, economic or political policy are relevant in a public law case, judges should normally take their cue from Parliament. The Court's critics are often people who object not just to the constitutional role of judges but to the role of Parliament itself. Mr Carswell, for instance, would like to see a British government ruling by what he calls orders in council, i.e. by decree. We are only a democracy because governments are answerable to the elected House of Commons. So long as Parliamentary democracy remains the foundation of our constitution, the Supreme Court will have an indispensable role to play in our national life. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
