ICAI Notes- Non-Funding Institutions for Business Facilitation in India- 2 | Business and Commercial Knowledge (Old Scheme) - CA Foundation PDF Download

Securities and Exchange Board of India (SEBI)
I.  Introduction

The Securities and Exchange Board of India (SEBI) was established by the Government of India on 12th April 1988 and given statutory powers in 1992 with SEBI Act, 1992 being passed in the Parliament. The SEBI Act, 1992 has come into force with effect from 30th January, 1992.

SEBI is an authority to regulate and develop the Indian capital market and protect the interest of investors in the capital market. Controller of Capital Issues has been repealed by the SEBI, an authority under Capital Issue (Control) Act, 1947.

SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad, respectively.

Controller of Capital Issues (CCI) was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947. In April 1988, the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.
The SEBI is managed by a board, which consists of following:

• A Chairman, who shall be appointed by Central Government and he shall be a person of ability, integrity and standing in the field of securities market, law, finance, accountancy, economics, administration, etc.
• Two members from amongst the officials of the Ministry of the Central Government dealing with Finance and administration of the Companies Act, 2013, who shall be nominated by the Central Government.
• One member from amongst the official of RBI, who shall be nominated by RBI.
• Five other members out of which atleast three members shall be whole-time members, who shall be appointed by Central Government and they shall be persons of ability, integrity and standing in the field of securities market, law, finance, accountancy, economics, administration, etc.

II. Functions and Responsibilities of SEBI

The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “...to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to”.

SEBI has to be responsive to the needs of three groups, which constitute the market:

• the issuers of securities
• the investors
• the market intermediaries.

SEBI has three functions rolled into one body which are as follows:

• Quasi-legislative: SEBI drafts regulations in its legislative capacity.

• Quasi-judicial: SEBI passes rulings and orders in its judicial capacity.

• Quasi-executive: SEBI conducts investigation and enforcement action in its executive function.

Though this makes it very powerful, there is an appeal process to create accountability. There is a Securities Appellate Tribunal which is a three-member tribunal and is headed by Mr. Justice J P Devadhar, a former judge of the Bombay High Court. A second appeal lies directly to the Supreme Court. SEBI has taken a very proactive role in streamlining disclosure requirements to international standards.

III. Powers of SEBI

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

1. To approve by−laws of stock exchanges.

2. To require the stock exchange to amend their by−laws.

3. To inspect the books of accounts and call for periodical returns from recognized stock exchanges.

4. To inspect the books of accounts of a financial intermediary.

5. To compel certain companies to list their shares in one or more stock exchanges.

IV. SEBI’s Role in Business Facilitation

SEBI is responsible for the development of India’s capital market i.e. market for the corporate issues of capital. For example, it facilitates public offering of capital by the company. Thus, these companies are able to access the capital market for their funding requirements. It also oversees the susequent trading of their shares on the floor of the stock exchanges. It even facilitates oversaes entities desrious of particiating in Indian

capital markets and the domestic capital market entities desirous of participation in oversaes markets. It coordinates with the market developers and regulators aborad. It is responsible for investors’ faith in the functioning of the capital markets and thus assures the corporates of steady flow of funds.

Competition Commission of India (CCI)
I. Introduction

Competition is a contest between organisms, animals, individuals, groups, etc. in the context of business, competition is the best means of ensuring that the ‘Common Man' has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers.

A fair competition in market is essential to achieve this objective. Competition Commission was set up to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.
Competition may be either Direct or Indirect as discussed below:

i. Direct competition: Products that perform the same function compete against each other. Example: Fast-food restaurants McDonald’s and Burger King, Coca-Cola and Pepsi, Pizza Hut and Dominos etc have competition with each other.

ii. Indirect competition: Products that are close substitutes for one another compete.

Example: A fine dining restaurant has competition with other local restaurants, but it also competes with nearby supermarkets that offer ready-to-eat meals such as frozen parathas and eat and serve

dishes.

There should be free and fair competition in the market to get the following benefits:

a. Encourages Innovation.

b. Increases Efficiency.

c. Punishes the Laggards.

d. Boosts choice improves quality, reduces costs.

e. Ensures availability of goods in abundance of acceptable quality in affordable price.
II. The Competition Act, 2002

Basically, Competition law is a tool to implement and enforce competition policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government interference in the market. The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.
III. Features of the Competition Act, 2002

i. The competition Act, 2002 has been enacted to prevent practices having an appreciable adverse effect on competition.

ii. To promote and sustain competition in the market and to protect the interests of consumers.

iii. To ensure freedom of trade.

iv. With the enforcement of the Competition Act, 2002 the MRTP Act, 1969 shall stand repealed and the MRTP Commission shall be dissolved.

v. The Competition Act, 2002 provides for the establishment of Competition Commission of India (CCI) and prescribes its duties, functions, and powers.
IV. The Competition Commission of India (CCI)

The Competition Commission of India (CCI), was established by the Central Government on 14th October 2003. The Commission is a body corporate having perpetual succession and common seal. CCI consists of a Chairperson and Six Members appointed by the Central Government. It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India. The Commission

is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

The Competition commission has been establishment for the accomplishment of the following objectives:

• To prevent practices having adverse effect on competition.
• To promote and sustain competition in markets.
• To protect the interests of consumers and,
• To Ensure freedom of trade carried on by other participants in markets, in India

V. Role of CCI

The preamble to the competition act states “An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto”.

To achieve its objectives, the Competition Commission of India endeavours to do the following:

• Make the markets work for the benefit and welfare of consumers.
• Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy.
• Implement competition policies with an aim to eectuate the most ecient utilisation of economic
• resources.
• Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
• Effiectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.

VI. Role of CCI As a Business Facilitator

Fair competition is key to a thriving business sector. CCI protects businesses from other businesses’ unfair practices and penalises the erring entitites too. It promotes competition by preventing abuse of dominance by a market player to the deterrent of other competitors and the consumers. As such it ensures the coexistence of large and small enterprises.
Insurance Regulatory and Development Authority of India (IRDAI)
I. Introduction

Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous apex statutory body which regulates and develops the insurance industry in India. It was constituted under Insurance Regulatory and Development Authority Act, 1999 and duly passed by the Parliament.

The IRDA Act, 1999 allows private players to enter the insurance sector in India besides a maximum foreign equity of 26 per cent in a private insurance company having operations in India. The Insurance Bill (Proposed by UPA government in July, 2013) but passed in July, 2014, raised the FDI limit in insurance sector to 49%. It serves as an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith.
IRDAI role is to protect rights of policy holders and they provide registration certification to life insurance companies and responsible for renewal, modification, cancellation and suspension of this registered certificate.
II. Mission Statement of the Authority

• To protect the interests of and secure fair treatment to policyholders;
• To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation
• payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy;
• To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;
• To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;
• To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players;
• To take action where such standards are inadequate or ineffectively enforced;
• To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.

III. Duties, Powers and Functions of IRDAI

Section 14 of IRDAI Act, 1999 lays down the duties, powers and functions of IRDAI.

Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

The powers and functions of the Authority shall include:

• issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
• protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policyholders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
• specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents
• specifying the code of conduct for surveyors and loss assessors;
• promoting efficiency in the conduct of insurance business;
• promoting and regulating professional organisations connected with the insurance and re-insurance business;
• levying fees and other charges for carrying out the purposes of this Act;
• calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;
• control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business.
• specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
• regulating investment of funds by insurance companies;
• regulating maintenance of margin of solvency;
• adjudication of disputes between insurers and intermediaries or insurance intermediaries;
• supervising the functioning of the Tariff Advisory Committee;
• specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f );
• specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
• exercising such other powers as may be prescribed.

IV. Role of IRDAI as Business Facilitator

IRDAI also acts as a business facilitator. Firstly, it takes steps to regulate and develop the insurance industry in the country. Secondly, it serves as an authority to protect the interest of the insurance policy holders in create confidence among them. Thirdly, IRDAI disseminates a lot of information for the benefit of policy holders and also for educating the general public about the advantages of getting insurance policies and keeping then alive.