ABSTRACT
The new Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2021 are examined in this research paper for their ability to effectively control the Indian securities market with those of the United States, United Kingdom, and Japan. The introduction to the paper gives background information on SEBI and outlines the goals of the new laws. The next step is to perform a literature study to find pertinent studies and reports on the subject. The paper analyses the main aspects of the new rules and their potential effects on the securities markets. The article provides a comparative examination of the regulatory frameworks in these nations, showing similarities and differences in their strategies for fostering accountability, transparency, and good corporate governance. The results of the study indicate that although these countries’ regulatory frameworks share some commonalities, there are also big disparities in how they are put into practice. The final section of the study offers suggestions for SEBI on how they might upgrade their regulatory frameworks to increase the effectiveness of the regulations.
KEYWORDS –SEBI, Listing Obligations and Disclosure Requirements (LODR) Regulations, Securities markets Regulations (SEC,FSA,FCA), Transparency, corporate governance.
INTRODUCTION
To safeguard investors and maintain fairness and transparency in the market, India’s securities markets have been subject to a number of laws over the years. The principal regulatory agency in charge of regulating India’s securities markets is the Securities and Exchange Board of India (SEBI). The Listing Obligations and Disclosure Requirements (LODR) Regulations were new rules announced by SEBI in 2021 with the intention of significantly enhancing the regulatory environment for the Indian securities markets. These rules were introduced at a time when the effectiveness of regulatory frameworks in various nations, including the United States, the United Kingdom, and Japan, was being examined with greater scrutiny. The new regulations strengthen the duties of market players, such as auditors, underwriters, and other intermediaries, and impose greater disclosure requirements on listed businesses. The new rules have the goal to strengthen the corporate governance , facilitate compliance and enforcement, to increase responsibility and transparency in the securities markets and to foster investor trust.
RESEARCH MEATHODOLOGY
The Methodology used in this research paper is strictly doctrinal.A comparative analysis of the regulatory frameworks of the four countries is conducted to identify the similarities and differences in their approaches to regulating securities markets. The report is the descriptive analysis of the effectiveness of the new Securities and Exchange Board of India (SEBI)(listing obligations and disclosure Requirements) Regulations ,2021 in regulating securities markets in India with those of Securities Exchange commission (SEC) in The United states , Financial Conduct Authority(FCA) in United Kingdom and Financial Services Agency (FSA) in Japan . The most precise secondary data on had been collected from authentic sources. The data used here has been collected from different websites , articles, journals and legislations.
REVIEW OF LITERATURE
G Sabarinathan ,”Securities and Exchange Board of India and the Regulation of the Indian Securities Market”
This article provides a systematic evaluation of the contribution of sebi to the working of the Indian securities market and also the key elements of the Regulatory provisions that SEBI administers for the Indian securities market
Relevant regulations referred:-
The Securities and Exchange Board of India,1992 regulations – The SEBI regulations provide comprehensive guidelines and restrictions for numerous market participants, including listed firms, intermediaries, stock exchanges, mutual funds, and investors. All regulations produced by the regulatory body are accessible on the SEBI website, along with other pertinent data such as circulars, guidelines, and reports.
US. Securities and Exchange Commission – The website gives users access to a wealth of knowledge on a variety of securities market-related subjects and serves as a crucial tool for upholding transparency and accountability in the US securities sector.
Financial Conduct Authority – The FCA website offers a lot of knowledge on a variety of subjects pertaining to UK financial regulation. The FCA website contains important information, some of which are: Consumer information, Firm information, Regulations and guidelines, Enforcement actions, Market data.
Financial Service Agency -A variety of information regarding Japanese financial regulation is available on the FSA website. The FSA website contains important information, such as: laws and regulations, monitoring and inspections, collaboration on a global scale and additional responsibilities
According to a comparison of SEBI laws with those in the US, UK, and Japan, there are certain parallels in the way securities markets are regulated, but there are also some key variations.
The scope and depth of restrictions is one of the key distinctions. While SEBI’s regulatory system is more narrowly focused on listed businesses, the US and UK have more comprehensive regulatory frameworks that cover a wider range of activities and entities. In terms of scope, Japan’s regulatory system lies somewhere between SEBI and the US/UK.
The method of enforcement varies as well. While SEBI’s enforcement tools are still being developed, the US and UK have more effective enforcement practices, including criminal punishments. Japan’s enforcement practices have recently been improved.
OVERVIEW OF SECURITY MARKET REGULATIONS IN INDIA, US, UK, JAPAN
INDIA
The Indian securities markets are governed by SEBI, or the Securities and Exchange Board of India. It was founded in 1992 as an independent statutory organisation with the objectives of fostering the growth of the Indian securities market, safeguarding investors’ interests, and regulating the securities markets[1]. One of SEBI’s main duties is to oversee the actions of stock exchanges, intermediaries, and other securities market participants. In addition to creating policies and rules, it has the authority to look into potential violations and punish market players[2].
SEBI has launched a number of measures in recent years with the goals of increasing transparency, boosting governance procedures, and safeguarding investor interests. The Listing Obligations and Disclosure Requirements (LODR) regulations, which were first adopted in 2015 and revised in 2021 to further improve the regulatory environment, are one such initiative. The regulatory framework established by SEBI is essential for guaranteeing the smooth operation of the Indian securities markets[3].
Listing Obligations and Disclosure Requirements (LODR) for listed companies in India as per SEBI includes some of the key regulations like disclosure of financial results and other information, Appointment of directors and independent directors, Related-party transactions, Enhanced Disclosures on Corporate Governance[4] etc
THE UNITED STATES OF AMERICA
The Securities and Exchange Commission (SEC), which was established in 1934 by the Securities Exchange Act, oversees the securities markets in the United States[5].
The SEC’s objectives include safeguarding investors, fostering capital development, and preserving fair, orderly, and efficient markets. The SEC works to encourage a market environment deserving of the public’s confidence[6].
Corporation Finance, Trading and Markets, Investment Management, Enforcement, and Economic and Risk Analysis are the SEC’s five divisions. The Corporation Finance division examines and controls public company filings, such as annual and quarterly reports and registration statements. Exchanges, broker-dealers, and clearing agencies are just a few of the market participants that the Trading and Markets division regulates. Investment companies and investment advisers are governed by the Investment Management division. Federal securities law offences are looked into and prosecuted by the Enforcement division. To assist the SEC’s rulemaking and enforcement efforts, the Economic and Risk Analysis section provides economic research and analysis[7].
UNITED KINGDOM
The Financial Conduct Authority (FCA), which oversees the financial services sector in the UK, is in charge of ensuring that the country’s financial markets operate smoothly. For people, businesses, and the economy as a whole, the organisation seeks to ensure honest and fair marketplaces. The Authority achieves this by fostering competition, protecting the financial markets, and protecting consumers[8].
The Treasury and Parliament of the United Kingdom have jurisdiction over the FCA. In order to achieve its strategic purpose, the Financial Conduct Authority (FCA) has three operational goals: safeguarding consumer interests, preserving and enhancing the integrity of the British financial system, and fostering healthy competition among financial services providers.
The FCA was founded on April 1, 2013, and it took over the Financial Services Authority’s responsibilities for conduct and pertinent prudential regulation. The FCA has broad authority to carry out its mission, including the ability to make rules and conduct investigations and enforcement actions. Since the FCA is an independent organisation without government support, it must have the authority to increase fees. The FCA, therefore, imposes fees to approved firms that carry out operations regulated by the FCA and other agencies such as recognized investment exchanges[9].The FCA website states that the organisation controls the behaviour of 59,000 financial services companies and financial markets in the UK.
JAPAN
The Japanese government’s Financial Services Agency, or FSA, is in charge of regulating banking, insurance, and securities and exchange. The Financial Supervisory Agency was reorganised in July 2000, and was created under the authority of the Financial Reconstruction Commission. Its main office is in Tokyo[10].
The Financial Services Agency’s responsibility is to protect depositors, insurance policyholders, and investors in securities while ensuring the stability of Japan’s financial system[11].Through the Securities and Exchange Surveillance Commission, it is in charge of the examination, regulation, and openness of the financial system. Additionally, it is in charge of the nation’s CPAs and the Auditing Oversight Board.
COMPARATIVE STUDY ON SECURITY MARKET REGULATIONS IN THE FOUR NATIONS
| AREA OF REGULATION | INDIA | UNITED STATES | UNITED KINGDOM | JAPAN |
| Regulatory body | Securities and Exchange Board of India(SEBI) | Securities and Exchange Commission (SEC) | Financial Conduct Authority(FCA) | Financial Services Agency (FSA) |
| Disclosure Requirements | SEBI(LODR)Regulations require companies to disclose related party transactions, risk management practices, and corporate governance policies | SEC requires companies to disclose financial information, ownership structure, and executive compensation | FCA requires companies to disclose financial information, governance policies, and environmental, social, and governance (ESG) metrics | FSA requires companies to disclose financial information, ownership structure, and risk management practices |
| Enforcement Mechanisms | SEBI has the power to impose fines, initiate legal action, and suspend trading of securities | SEC has the power to impose fines, initiate legal action, and revoke licenses | FCA has the power to impose fines, initiate legal action, and ban individuals from the industry | FSA has the power to impose fines, initiate legal action, and revoke licenses |
| Investor Protection | SEBI aims to protect investors by ensuring transparency and accountability in securities markets | SEC aims to protect investors by ensuring fair and efficient securities markets and preventing fraud | FCA aims to protect investors by promoting competition and transparency in financial markets | FSA aims to protect investors by ensuring fair and transparent securities markets and promoting stable financial systems |
| Corporate Governance | SEBI (LODR) Regulations aim to enhance corporate governance practices in listed companies | SEC requires companies to have independent boards and audit committees | UK Corporate Governance Code sets out standards for board composition, accountability, and remuneration | Japan’s Corporate Governance Code promotes transparency and accountability in corporate decision-making |
ANALYSIS OF SIMILARITIES AND DIFFERENCES
| COUNTRIES | SIMILARITIES | DIFFERENCES |
| India | Regulations in all three nations demand that businesses provide information in a timely and accurate manner. | In comparison to US and UK regulations, India’s SEBI regulations include stronger rules regarding related party transactions and corporate governance practises. In Japan, in addition to the securities laws, there is a distinct Corporate Governance Code that is applicable. |
| United States | Public companies and securities offerings must be registered with the respective securities regulators in each of the three nations. | Compared to SEBI and UK laws, the Securities Act of 1933 and Securities Exchange Act of 1934 in the US offer more thorough and precise controls. The laws governing insider trading and market manipulation are more specific in the US. |
| United Kingdom | Companies are required by law in all three nations to disclose important information that could affect the value of their stock. | In contrast to SEBI’s and the US Securities and Exchange Commission’s more prescriptive regulations, the UK’s Financial Conduct Authority takes a principles-based approach to regulation. For public firms, independent directors must be appointed by law, something that is not required in the UK or the US. |
| Japan | All three nations demand ongoing material information disclosure from listed corporations | In comparison to the US and UK, Japan has tougher rules regarding shareholder rights, including the opportunity to suggest agenda topics and nominate directors. Tender offers and open mergers and acquisitions are subject to more extensive rules in Japan. |
SUGGESTIONS AND RECOMMENDATIONS
Streamline the regulatory framework: By combining and rationalising multiple rules and regulations, SEBI may want to consider simplifying the regulatory framework. As a result, market players may have an easier time complying with regulations.
Improving disclosure requirements: SEBI may think about increasing the information that listed businesses must disclose, particularly in regards to related party transactions, audit committee findings, and risk management. This could increase accountability and openness while boosting investor trust.
Enhance the regulatory framework for monitoring and enforcing compliance in order to enhance the enforcement procedures. SEBI may think about doing this by implementing increased penalties for non-compliance. By doing this, market participants can be discouraged from breaking the law and uphold high standards of behaviour.
Promote ethical business conduct: SEBI may want to think about rewarding businesses that follow ethical business conduct principles such timely and accurate disclosures, ethical behaviour, and social responsibility.
Engage with stakeholders: In order to receive feedback and evaluate the efficacy of the legislation, SEBI may want to explore interacting with stakeholders, such as investors, market participants, and other regulatory agencies. The regulatory system can be made more responsive to the interests of all stakeholders by doing this, which can assist identify areas for improvement.
CONCLUSION
This research paper concludes by offering a thorough comparative examination of the laws governing the securities markets in India, the USA, the UK, and Japan. In comparison to the laws in the other three nations, it assesses how well SEBI’s new Listing Obligations and Disclosure Requirements Regulations 2021 regulate the securities markets in India. It is clear from this analysis that every nation has a distinctive regulatory structure with distinct strengths and limitations. Regarding the regulatory approach and how the regulations affect the securities markets, there are certain parallels and variations that may be noted. The study also emphasizes the necessity of ongoing oversight and enhancement of legal frameworks in order to adjust to shifting market dynamics and new dangers. In order to improve the efficiency of the regulatory frameworks and advance investor protection and market stability, the study offers insightful analysis and recommendations for law makers, regulators, and market participants. Overall, this study adds to the continuing conversation about securities market regulations and lays the groundwork for future study and policy development in this area.
Author: P.SUVARNA DURGA (BBA;LLB(Hons))
University: SASTRA DEEMED UNIVERSITY
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