The financial service providers must assume greater responsibility and care when recommending or selling products and services to consumers, Financial Sector Legislative Reforms Commission (FSLRC) Chairman Justice (retd.) B. N. Srikrishna said here on Tuesday.
He delivered his special address at the Financial Sector Conclave-2014 by the Federation of Indian Chambers of Commerce and Industry and elaborated on the Commission’s report, which had been submitted last year after two years of deliberations.
A critical priority of the proposed reforms, he said, was to mandate that the financial service providers make clear, adequate and relevant disclosure to the consumers while selling the product or service.
The Commission’s report recommended a decisive move, away from the ‘Caveat Emptor’ or the ‘Buyer Beware’ concept, to the ‘Seller Beware’ regime, he said.
Defending the recommendations to separate the regulatory, investigatory and adjudicatory responsibilities of the financial sector regulatory bodies such as the Securities and Exchange Board of India, the RBI, the Insurance Regulatory and Development Authority and others, Mr. Justice Srikrishna said regulators such as the State they represent were for the people and not vice versa.
“The problem is that we have created regulators that function as mini State or ‘Nawab’…We [in the Commission] believe that, in a democracy, no one, not even the President, not even the regulator, is above the rule of law,” he said.
There was a need for a neutral third party that showed no bias towards investigators when adjudicating over violations. This was the Commission’s intention behind recommending the Financial Sector Appellate Tribunal, he averred.
He also dispelled fears that interference with regulatory authorities would compromise the efficiency by denying flexibility. In fact, Tribunal’s establishment had only increased SEBI’s efficacy.
Re-engineering of the financial regulatory architecture as recommended would profoundly impact the effectiveness of the financial systems, he said.
“Our financial architecture has become unwieldy and unresponsive… parts of our regulatory machinery have become brittle, fragile or worse, completely irrelevant, and utterly useless if not downright harmful to our interests. It is this concern which motivated the proposed reforms,” he asserted.
Indirectly referring to criticism on the recommendations, he said change was necessarily disruptive and people abhor it because it unsettled the powerful.
Nevertheless, it was necessary, and must be done here and now.
