Government of India Volume I: Analysis and Recommendations

FUNCTIONS AND POWERS OF THE REGULATOR
Table of Recommendations 4.9 Investigations
The Commission recommends that investigations should be:
◮ Carried out according to the written terms of investigation;
◮ Carried out by an appointed investigator;
◮ Finished within a time bound manner, unless extended by an administrative law officer; and
◮ Carried out with least disruption to the function or reputation of a business.
The investigators empowered under the draft Code should have the power to:
1. Require production of documents;
2. Require persons to answer questions;
3. Require co-operation of non-regulated entities in investigation; and
4. Require co-operation from other government agencies.
Table of Recommendations 4.10 Information-sharing between regulators
1. The draft Code should require the regulator to create a framework for sharing of information.
2. The electronic information framework of each regulator should be compatible with that of other regulator(s)
and agencies with which it regularly shares information.
3. The legal framework should have adequate checks and records to prevent misuse of informations.
1. A confidential manner so as to prevent panic before any finding; and
2. A time bound manner so as not to unduly burden the entity under investigation.
4.2.4. Sharing of information
Investigations are greatly assisted by a strong database providing details of the regulated
entities and the transactions they have undertaken. The Commission recognises that this
information may not be available at a single source. Hence, the Commission suggests
the creation of a single database, through which all information collected by regulator
(and other agencies in the financial sector architecture), will be routed (see the chapter
on systemic risk for a detailed discussion on this issue). Where regulator needs to obtain
information from other regulator(s) or government agencies, the draft Code creates
a framework for sharing information between the agencies. Table 4.10 provides the system
suggested by the Commission for sharing of information.
4.2.5. Consequence of violations
The Commission found that different regulators have different consequences for violations
of laws and regulations enforced by them. This creates detriment to the rule of law
and increases uncertainty about violations.
The Commission recommends that:
1. The consequence of violations be standardised;
2. The way the consequence is determined be regulated by law;
3. Similar violations be treated with similar consequence; and
4. The consequence be proportional to the violation and the behaviour of the violator.
The Commission recommends that whenever a violation is detected the regulator
must determine which of the following conditions led to the violation:
1. The violation was a result of an informed intent to commit the violation;
2. The violation was a result of serious negligence of maintaining standards expected of a reasonable
person carrying out the activity; or
3. The violation was a result of a mistake or was of a technical nature.
FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 35