A new set of rules are underway for the $1-trillion wealth management industry and the Reserve Bank of India (RBI) the Securities and Exchange Board of India (SEBI) may be made responsible for implementing these regulations and keeping a close watch on any violations.
The government has pooled in various regulatory resources to frame a comprehensive rule-book for wealth management practices by seeking inputs from the RBI, SEBI and other financial sector regulators, a senior official said.
Given the size of the industry and therefore a higher risk of large-scale frauds or manipulations, the new rules could comprise of SEBI and RBI being given powers to impose strict penalties.
While the RBI and SEBI would be primarily responsible for compliance of the rules, help would be sought from other regulators, namely commodity regulator Forwards Markets Commission (FMC), the Insurance Regulatory and Development Authority (IRDA) and Pension Fund and Regulatory Development Authority (PFRDA), whenever needed, the official said.
The proposed regulations are currently being given final touches and would soon be announced by the government, he added. The new set of rules are being framed under the aegis of the Financial Stability and Development Council (FSDC), a high-level regulatory body chaired by the finance minister that was set up by the government in December 2010 in place of erstwhile high-level coordination committee on financial markets.
The FSDC has held two meetings so far - the first in December 2010 and the second earlier this year - and the issue of the proposed wealth management regulations was discussed on both occasions. Besides, a sub-committee of FSDC held its first meeting last week, which was chaired by RBI governor D Subbarao and was attended by SEBI chairman UK Sinha, besides other regulators and finance ministry officials.
The sub-committee also discussed regulatory issues relating to wealth management and private banking businesses undertaken by banks.