Management information system for
implementation of Handbook on adoption of
governance enhancing and non-legislative
elements of the draft Indian Financial Code
Department of Economic Affairs,
Ministry of Finance,
Government of India
May 7, 2014
Contents
1 Introduction 3
2 Consumer Protection 5
3 Consumer Protection for Retail Consumers 33
4 Framing Regulations 51
5 Notices 62
6 Transparency 65
7 Transparency in Board Meetings 68
8 Reporting 70
9 Approvals 73
10 Investigation 76
11 Adjudication 79
12 Imposition of Penalty 82
13 Capacity Building 85
2
Chapter 1
Introduction
This document is a Management Information System (MIS) for the Ministry
of Finance (MoF) to monitor the implementation of the FSLRC Guidance
Handbook (Handbook) by financial sector regulators. It breaks down each
recommendation of the Handbook into clearly quantifiable questions that the
MoF can easily verify from the regulator's website and then assess whether
the recommendation has been complied with.
This MIS has been prepared with to fulfill the following objectives:
1. Provide an objective system of recording and aggregating information
related to the compliance with the Handbook; and
2. Enhance communication between regulators and MoF with regard to
the adoption of the Handbook.
1.1 How to use this MIS
In monitoring implementation of the Handbook, MoF will follow the following
steps:
1. Read the specific recommendation of the Handbook;
2. Understand the broad question that needs to be asked in order to an-
swer whether the specific recommendation has been complied with;
3. Break the broad question into smaller, specific questions that need to
be answered in order to arrive at the final answer. These questions
have been provided in the appended spreadsheet (Spreadsheet on the
3
4 CHAPTER 1. INTRODUCTION
analysis and reporting of the implementation of the FSLRC Handbook
(MIS Compliance Tracker)) that will be used to monitor compliance;
4. Identify, analyse and report the sources of information to be studied to
answer the specific questions;
5. Based on this analysis, answer the broad question on whether the rec-
ommendation has been implemented;
6. If in the MoF's assessment, a recommendation has not been complied
with, provide a statement on the reason for such a finding and identify
measures the regulator has to take to ensure compliance.
The results of MoF's monthly assessment will be made public. Additionally,
MoF will re-write the annual report rules for regulators to ensure that the
reporting requirements are in compliance with the Handbook, and provide
monitorable information with regard to compliance with the Handbook.
The following chapters track chapter 14 (Implementation) of the Handbook.
Chapter 2
Consumer Protection
2.1 Requirement of professional diligence
2.1.1 Recommendation 14.1.1.(1)
1. Recommendation:
"Document the existing regulations that deal with the stan-
dards of diligence that the financial service providers in dif-
ferent sectors must ensure in their dealings with consumers."
2. Compliance measure: Has the regulator compiled a set of all existing
regulations1 on standards of diligence and published the same on its
website?
3. Specific questions to be answered:
(a) Does such a compilation exist?;
(b) Is the compilation exhaustive (the regulator has to certify on its
website that the regulations in the compilation are exhaustive,
and no other regulation on this area exists)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
1
In this MIS and in the Handbook, "regulations" includes all rules, regulations, circulars
and other subordinate legislation issued by regulators.
5
6 CHAPTER 2. CONSUMER PROTECTION
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.1.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.1.2 Recommendation 14.1.1.(2)
1. Recommendation:
"Use the text of section 85 (Requirement of professional dili-
gence) of IFC, to issue regulations requiring all financial ser-
vice providers regulated by the respective regulator to follow
professional diligence in their dealings with consumers."
2. Compliance measure: Has the regulator issued regulations requiring
all financial service providers under its jurisdiction to follow professional
diligence with respect to its consumers in accordance with the IFC ?
3. Specific questions to be answered:
(a) Does such a regulation exist?
2.1. REQUIREMENT OF PROFESSIONAL DILIGENCE 7
(b) Has the regulator has followed the Handbook requirements on
framing regulations in making the regulations (board resolution
asking for draft regulations, publication of draft regulations along
with problem statement, statement of objectives, cost-benefit anal-
ysis and notice for comments)?;
(c) Does the regulation match the minimum standards of Section 85
of the IFC i.e. is the standard of diligence required commensurate
with:
i. Honest market practice;
ii. The principle of good faith;
iii. The level of knowledge, experience and expertise of the con-
sumer;
iv. The nature and degree of risk embodied in the financial prod-
uct or financial service being availed by the consumer; and
v. The extent of dependence of the consumer on the financial
service provider?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
8 CHAPTER 2. CONSUMER PROTECTION
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.1.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.1.3 Recommendation 14.1.1.(3)
1. Recommendation:
"Create and publish a statement on the consistency between
the requirement of professional diligence enshrined in section
85 of IFC, and the existing regulations governing interaction
between financial service providers and consumers. Based on
this statement, make amendments to sector-specific regula-
tions to ensure consistency of regulations with the overarch-
ing regulation requiring professional diligence in dealing with
consumers."
2. Compliance measure: To comply with this recommendation, the
regulator has to write and publish a statement of consistency between
the requirement of professional diligence enshrined in section 85 of the
IFC and the existing regulations governing interaction between finan-
cial service providers and consumers. It then has to amend its existing
regulations.
3. Specific questions to be answered:
(a) Has the regulator, after issuing a regulation as per recommenda-
tion 14.1.1.(2), written and published (on its website) a state-
ment of consistency between existing regulations governing re-
quiring diligence by financial service providers in their dealings
with consumers, and the regulation issued as per recommenda-
tion 14.1.1.(2)?
(b) Has the regulator amended its sector-specific regulations in accor-
dance with this statement?
(c) Have the amendments to the regulations followed the regulation-
making process stated in the Handbook?
4. Steps to be taken by MoF for answering these questions:
2.2. PROTECTION FROM UNFAIR TERMS IN FINANCIAL CONTRACTS9
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.1.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.2 Protection from unfair terms in financial
contracts
2.2.1 Recommendation 14.1.2.(1)
1. Recommendation:
"Document the existing regulations that deal with unfair
terms of contract in the sectors regulated by the respective
regulators."
2. Compliance measure:
10 CHAPTER 2. CONSUMER PROTECTION
(a) Has the regulator compiled a set of all existing regulations on
unfair terms of contract in various sectors regulated by it and
published the compilation on its website?
3. Specific questions to be answered:
(a) Does a compilation of existing regulations on unfair terms of con-
tract exist on the regulator's website?
(b) Is the compilation exhaustive (the regulator has to certify on its
website that the regulations in the compilation are exhaustive,
and no other regulation on this area exists)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.2.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.2. PROTECTION FROM UNFAIR TERMS IN FINANCIAL CONTRACTS11
2.2.2 Recommendation 14.1.2.(2)
1. Recommendation:
"Use the text of sections 86 (Unfair terms in financial con-
tracts) and 87 (Non-negotiated contracts) of the IFC, to is-
sue a regulation prohibiting unfair terms contract in non-
negotiated financial contracts. Every term in the regulation
should be the same as that in these sections."
2. Compliance measure: Has the regulator issued regulations on un-
fair terms in non-negotiated financial contracts in accordance with the
IFC ?
3. Specific questions to be answered:
(a) Check regulator's website to see whether such regulations exists;
(b) Check whether the regulator has followed the Handbook require-
ments on framing regulations in making the regulations (board
resolution asking for draft regulations, publication of draft reg-
ulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments)?;
(c) Check whether the regulations match the minimum standards of
Section 86 (Unfair terms in financial contracts) and 87 (Non-
negotiated contracts) of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
12 CHAPTER 2. CONSUMER PROTECTION
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to the final question in the table ?? is a
"Yes", the regulator will be deemed to have complied with recommen-
dation 14.1.2.(2). In any other case, the regulator will be deemed to
have not complied with the regulation.
2.2.3 Recommendation 14.1.2.(3)
1. Recommendation:
"Specify by regulation, an illustrative list of terms that would
be considered to be unfair terms. This list must be based on
the observations and case laws in the regulated sector for each
respective regulator, and application of the tests provided in
section 86 of the IFC"
2. Compliance measure: To comply with this recommendation, the
regulator has to issue regulations:
(a) specifying an illustrative list of terms that would be considered to
be unfair terms; and
(b) the list of terms has to be based on an observation and case-law
in the regulated sector, and application of the tests provided in
Section 86 (Unfair terms in Financial Contracts) of the IFC.
3. Specific questions to be answered:
(a) Does the regulation exist?
(b) Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?;
2.2. PROTECTION FROM UNFAIR TERMS IN FINANCIAL CONTRACTS13
(c) Do the documents accompanying the regulations explain how the
regulation is based on an observance of the regulated sector and
existing case-laws?
(d) Do the regulations apply the tests provided in Section 86 of the
IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.2.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.2.4 Recommendation 14.1.2.(4)
1. Recommendation:
"Create and publish a statement on the consistency between
the protection against unfair terms of contract envisaged in
14 CHAPTER 2. CONSUMER PROTECTION
section 86 of the IFC, and the existing regulations governing
such terms in various sectors. Based on this statement, make
amendments to sectoral regulations to ensure consistency of
regulations with the overarching regulation protecting con-
sumers from unfair terms of contract."
2. Compliance measure: To comply with this recommendation the reg-
ulator has to issue a statement of consistency between existing regula-
tions and its new regulation on unfair terms in financial contracts. It
then has to amend its existing regulations.
3. Specific questions to be answered:
(a) Does a statement of consistency between existing regulations gov-
erning unfair terms in financial contracts, and the regulation is-
sued as per recommendation 14.1.2.(2) exist?
(b) Has the regulator amended its sector-specific regulations in accor-
dance with this statement?
(c) Have the amendments to the regulations followed the regulation-
making process stated in the Handbook?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
2.3. PROTECTION FROM UNFAIR CONDUCT 15
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.2.(4). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.3 Protection from unfair conduct
2.3.1 Recommendation 14.1.3.(1)
1. Recommendation: "Document the existing regulations that deal
with unfair conduct in the sectors regulated by the respective regu-
lators. ."
2. Compliance measure: Has the regulator compiled a set of all existing
regulations on unfair conduct in various sectors regulated by it and
published the compilation on its website?
3. Specific questions to be answered:
(a) Does a compilation of existing regulations on unfair conduct exist
on the regulator's website?
(b) Is the compilation exhaustive (the regulator has to certify on its
website that the regulations in the compilation are exhaustive,
and no other regulation on this area exists)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
16 CHAPTER 2. CONSUMER PROTECTION
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.3.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.3.2 Recommendation 14.1.3.(2)
1. Recommendation:
"Use the text of sections 89, 90 and 91 of the IFC, to issue
a regulation prohibiting unfair conduct by financial service
providers or their representatives. Every term in the regu-
lation should be defined in the same way as it is defined in
these sections."
2. Compliance measure: To comply with this recommendation reg-
ulators have to frame regulations on unfair terms in non-negotiated
financial contracts in accordance with Sections 89, 90 and 91 of the
IFC.
3. Specific questions to be answered:
· Does such a regulation exist?;
· Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?;
2.3. PROTECTION FROM UNFAIR CONDUCT 17
· Do the regulations match the minimum standards of Sections 89,
90 and 91 of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.3.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.3.3 Recommendation 14.1.3.(3)
1. Recommendation:
"Create a statement on the consistency between the pro-
hibition of unfair conduct envisaged in sections 89, 90 and
91 of the IFC, and the existing regulations governing such
conduct in various sectors. Based on this statement, make
amendments to sectoral regulations to ensure consistency of
18 CHAPTER 2. CONSUMER PROTECTION
regulations with the overarching regulation prohibiting un-
fair conduct."
2. Compliance measure: To comply with this recommendation the reg-
ulator has to issue a statement of consistency between its existing reg-
ulations and the new regulation on unfair conduct framed as per rec-
ommendation 14.1.3.(2). It then has to amend its existing regulations.
3. Specific questions to be answered:
(a) Has the regulator, after issuing a regulation as per recommenda-
tion 14.1.3.(2), written and published (on its website) a statement
of consistency between existing regulations governing unfair con-
duct, and the regulation issued as per recommendation 14.1.3.(2)?
(b) Has the regulator amended its sector-specific regulations in accor-
dance with this statement?
(c) Have the amendments to the regulations followed the regulation-
making process stated in the Handbook?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
2.4. PROTECTION OF PERSONAL INFORMATION 19
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.3.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.4 Protection of personal information
2.4.1 Recommendation 14.1.4.(1)
1. Recommendation:
"Use the text of sections 92 and 93 of IFC, to issue a regula-
tion protecting personal information of all consumers inter-
acting with the financial sector regulated by the respective
regulator. Every definition and obligation in the regulation
should be the same as it is in these sections."
2. Compliance measure:
(a) The regulator has to issue regulations protecting personal infor-
mation of all consumers using the text of Section 92 (Meaning of
personal information) and Section 93 (Principles governing use of
personal information) of the IFC ?
(b) Is every definition and obligation in the regulations the same as it
is in Sections 92 and 93 of the IFC
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?
(c) Do the regulations match the minimum standards of Section 92
(Meaning of personal information) and Section 93 (Principles gov-
erning use of personal information) of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
20 CHAPTER 2. CONSUMER PROTECTION
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.4.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.4.2 Recommendation 14.1.4.(2)
1. Recommendation:
"
Document the existing regulations that deal with protection
of personal information of financial consumers."
2. Compliance measure:
(a) Has the regulator compiled a set of all existing regulations on
unfair conduct in various sectors regulated by it and published
the compilation on its website?
3. Specific questions to be answered:
2.4. PROTECTION OF PERSONAL INFORMATION 21
(a) Check whether a compilation of existing regulations on unfair con-
duct exist on the regulator's website.
(b) Check whether the compilation is exhaustive i.e. the regulator has
to certify on its website that the regulations in the compilation are
exhaustive, and no other regulation on this area exists.
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.4.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.4.3 Recommendation 14.1.4.(3)
1. Recommendation:
"Create a statement on the consistency between the protec-
tion of personal information envisaged in sections 92 and 93
22 CHAPTER 2. CONSUMER PROTECTION
of IFC, and the existing regulations governing such informa-
tion in various sectors. Based on this statement, regulators
should make amendments to sectoral regulations to ensure
consistency of regulations with the overarching regulation
protecting personal information."
2. Compliance measure: To comply with this recommendation the reg-
ulator has to write and publish a statement of consistency between
existing regulations on the protection of personal information and the
regulation it has framed as per Recommendation 14.1.4. It then has to
amend its existing regulations.
3. Specific questions to be answered:
(a) Has the regulator, after issuing a regulation as per recommenda-
tion 14.1.4.(1), written and published (on its website) a statement
of consistency between existing regulations governing the protec-
tion of personal information, and the regulation issued as per rec-
ommendation 14.1.4.(1)?
(b) Has the regulator amended its sector-specific regulations in accor-
dance with this statement?
(c) Have the amendments to the regulations followed the regulation-
making process stated in the Handbook?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
2.5. REQUIREMENT OF FAIR DISCLOSURE 23
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.4.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.5 Requirement of fair disclosure
2.5.1 Recommendation 14.1.5.(1)
1. Recommendation:
"Document the existing disclosure regulations in the sectors
regulated by the respective regulators."
2. Compliance measure: To comply with this recommendation the reg-
ulator has to create a document compiling its existing disclosure regu-
lations.
3. Specific questions to be answered:
(a) Does a compilation of existing disclosure regulations exist on the
regulator's website?
(b) Is the compilation exhaustive (the regulator has to certify on its
website that the regulations in the compilation are exhaustive,
and no other regulation on this area exists)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
24 CHAPTER 2. CONSUMER PROTECTION
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.5.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.5.2 Recommendation 14.1.5.(2)
1. Recommendation:
"Use the text of sections 95 and 96 of the IFC, to issue a
regulation requiring initial disclosures and continuing disclo-
sures by financial service providers and their representatives.
Every definition and obligation in the regulation should the
same as that in these sections."
2. Compliance measure: Has the regulator issued regulations on ini-
tial and continuing disclosures in accordance with Section 95 (Initial
Disclosures) and Section 96 (Continuing disclosures) of the IFC ?
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
2.5. REQUIREMENT OF FAIR DISCLOSURE 25
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?;
(c) Do the regulations match the minimum standards of Sections 95
and 96 of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.5.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.5.3 Recommendation 14.1.5.(3)
1. Recommendation:
"Create a statement on the consistency between the disclo-
sure requirements envisaged in sections 95 and 96 of the IFC,
and the existing regulations governing disclosures in various
26 CHAPTER 2. CONSUMER PROTECTION
sectors. Based on this statement, regulators should make
amendments to sectoral regulations to ensure consistency of
regulations with the overarching regulation requiring initial
disclosures and continuing disclosures."
2. Compliance measure:
(a) The regulator, after issuing a regulation as per recommendation
14.1.5.(2), has to write and publish (on its website) a statement
of consistency between existing regulations governing initial and
continuing disclosures, and the regulation issued as per recom-
mendation 14.1.5.(2)
(b) The regulator has to amend its sector-specific regulations in ac-
cordance with this statement?
(c) The amendments to the regulations followed the regulation-making
process stated in the Handbook?
3. Specific questions to be answered:
(a) Does a statement of consistency between its regulations on ini-
tial and continuing disclosures (issued as per recommendation
14.1.5.(2)) and its existing regulations exist?
(b) Have existing regulations been amended in accordance with the
statement of consistency?
(c) Has the regulator has followed the Handbook requirements on
framing regulations in amending the regulations (board resolution
asking for draft regulations, publication of draft regulations along
with problem statement, statement of objectives, cost-benefit anal-
ysis and notice for comments)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
2.6. REDRESS OF COMPLAINTS 27
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance TrackerMIS Compliance Tracker, and therefore a "No",
MoF must provide the following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.5.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.6 Redress of complaints
2.6.1 Recommendation 14.1.6.(1)
1. Recommendation:
"Document the existing regulations requiring internal mecha-
nisms to redress consumer grievances in the sectors regulated
by the respective regulators."
2. Compliance measure: The regulator has to compile a set of all exist-
ing disclosure regulations requiring financial service providers to have
internal mechanisms to redress consumer grievances in various sectors
regulated by it and published the compilation on its website.
3. Specific questions to be answered:
(a) Does a compilation of existing regulations on redress mechanisms
exist?
(b) Is the compilation exhaustive (the regulator has to certify on its
website that the regulations in the compilation are exhaustive,
and no other regulation on this area exists)?
28 CHAPTER 2. CONSUMER PROTECTION
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.6.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.6.2 Recommendation 14.1.6.(2)
1. Recommendation:
"Use the text of section 98 of the IFC, to issue a regula-
tion requiring each financial service provider to develop and
maintain an internal mechanism for grievance redress "
2. Compliance measure: The regulator has to issue regulations requir-
ing financial service providers to develop and maintain internal mech-
anisms for grievance redressal in accordance with Section 98 (Respon-
sibility of financial service providers) of the IFC
2.6. REDRESS OF COMPLAINTS 29
3. Specific questions to be answered:
(a) Do the regulations exist?;
(b) Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?;
(c) Do the regulations match the minimum standards of Sections 98
of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No" in MIS Compliance Tracker,
MoF must provide the following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.6.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
30 CHAPTER 2. CONSUMER PROTECTION
2.6.3 Recommendation 14.1.6.(3)
1. Recommendation:
"Use the text of section 99 of the IFC, relevant information
about the respective sectors, and international best practices,
to issue regulations governing the systems and processes for
handling consumer grievances through the internal mecha-
nism for grievance redress "
2. Compliance measure: The regulator has to issue regulations requir-
ing financial service providers to develop and maintain internal mech-
anisms for grievance redressal in accordance with Section 99 (Regula-
tions regarding redress of complaints) of the IFC ?
3. Specific questions to be answered:
(a) Do such regulations exist?
(b) Has the regulator followed the Handbook requirements on fram-
ing regulations in making the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?;
(c) Do the regulations match the minimum standards of Sections 99
of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
2.6. REDRESS OF COMPLAINTS 31
5. Non-compliance: For every answer that scores less than 100 in Table
??, and therefore a "No" in Table ??, MoF must provide the following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.1.6.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
2.6.4 Recommendation 14.1.6.(4)
1. Recommendation:
"Create a statement on the consistency between the require-
ments envisaged in section 98 of the IFC, and the existing
regulations governing internal redress of consumer grievances
in various sectors. Based on this statement, regulators should
make amendments to sectoral regulations to ensure consis-
tency of regulations with the overarching regulation requiring
internal mechanisms to redress consumer grievances."
2. Compliance measure:
(a) Has the regulator, after issuing a regulation as per recommenda-
tion 14.1.6.(2), written and published (on its website) a statement
of consistency between existing regulations, and the regulation
issued as per recommendation 14.1.6.(2)?
(b) Has the regulator amended its sector-specific regulations in accor-
dance with this statement?
(c) Have the amendments to the regulations followed the regulation-
making process stated in the Handbook?
3. Specific questions to be answered:
(a) Does a statement of consistency between its regulations (issued as
per recommendation 14.1.6.(2)) and its existing regulations exist?
(b) Have existing regulations have been amended in accordance with
the statement of consistency?
32 CHAPTER 2. CONSUMER PROTECTION
(c) Has the regulator followed the Handbook requirements on framing
regulations in amending the regulations (board resolution asking
for draft regulations, publication of draft regulations along with
problem statement, statement of objectives, cost-benefit analysis
and notice for comments)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in MIS
Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to the final question in the table ?? is a
"Yes", the regulator will be deemed to have complied with recommen-
dation 14.1.6.(4). In any other case, the regulator will be deemed to
have not complied with the regulation.
Chapter 3
Consumer Protection for Retail
Consumers
3.1 Suitability of advice for retail consumers
3.1.1 Recommendation 14.2.1.(1)
1. Recommendation:
"Use the text of Section 100 of the IFC, to issue a regula-
tion requiring suitability assessment to be done by any retail
advisor or its representative before giving advice to a retail
consumer. The definitions and obligations in the regulations
must be the same as those in the section."
2. Compliance measure:
(a) The regulator has to issue a regulation requiring suitability assess-
ment to be done by any retail advisor or its representative before
giving advice to a retail consumer; and
(b) The definitions and obligations in the regulations have to match
Section 100 of the IFC.
3. Specific questions to be answered:
(a) Does such a regulation exists?
(b) Has the regulator has followed the IFC requirements as outlined
in the Handbook on framing regulations in making the regulations
33
34CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
(board resolution asking for draft regulations, publication of draft
regulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments);
(c) Does the regulation match Section 100 of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.1.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.1.2 Recommendation 14.2.1.(2)
1. Recommendation:
"Specify, by regulation, a list of financial products and finan-
cial services that must not be provided to retail consumers
without being accompanied by advice as per section 100 of
3.1. SUITABILITY OF ADVICE FOR RETAIL CONSUMERS 35
IFC. IFC, This list must be based on the tests given in Sec-
tion 101 of the."
2. Compliance measure:
(a) The regulator has to issue a regulation specifying a list of financial
products and financial services that must not be provided to retail
consumers without being accompanied by advice as per section
100 of IFC ; and
(b) The tests in the regulation have to match Section 101 of the IFC.
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Has the regulator followed the IFC requirements as outlined in
the Handbook on framing regulations in making the regulations
(board resolution asking for draft regulations, publication of draft
regulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments);
(c) Does the regulation match Section 101 of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
36CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.1.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.1.3 Recommendation 14.2.1.(3)
1. Recommendation:
"Document the existing regulations that deal with suitabil-
ity requirements in the sectors regulated by the respective
regulators."
2. Compliance measure:
(a) The regulator has to compile a set of all existing regulations that
deal with suitability requirements and publish the compilation on
its website.
(b) The regulator has to certify that the compilation is exhaustive.
3. Specific questions to be answered:
(a) Does such a compilation exist?
(b) Has the regulator has certified that the compilation is exhaustive?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
3.1. SUITABILITY OF ADVICE FOR RETAIL CONSUMERS 37
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.1.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.1.4 Recommendation 14.2.1.(4)
1. Recommendation:
"Create a statement on the consistency between the suit-
ability requirement envisaged in sections 100 and 101 of the
IFC, and the existing regulations governing advisors in var-
ious sectors. Based on this statement, make amendments to
sectoral regulations to ensure consistency of regulations with
the overarching regulation requiring suitability assessment."
2. Compliance measure:
(a) The regulator, after issuing a regulation as per recommendations
14.2.1.(1) and 14.2.1.(2), has to write and publish (on its website)
a statement of consistency between existing regulations, and the
regulation issued as per recommendations 14.2.1.(1) and 14.2.1.(2).
(b) The regulator has to amend its sector-specific regulations in ac-
cordance with this statement.
(c) The amendments to the regulations have to follow the regulation-
making process stated in the Handbook?
3. Specific questions to be answered:
(a) Does such a compilation exist?
(b) Has the regulator has certified that the compilation is exhaustive?
38CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
4. Steps to be taken by MoF for answering these questions:
· Check regulator's website to see whether a statement of consis-
tency between its regulation and its existing regulations exists;
· Check regulator's website to see whether existing regulations have
been amended in accordance with the statement of consistency;
and
· Check whether the regulator has followed the Handbook require-
ments on framing regulations in amending the regulations (board
resolution asking for draft regulations, publication of draft reg-
ulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments).
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.1.(4). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.2 Dealing with conflict of interests
3.2.1 Recommendation 14.2.2.(1)
1. Recommendation:
"Use the text of section 102 (Dealing with conflict of inter-
ests) of the IFC, to issue a regulation requiring disclosure
of conflicts of interest and the duty to give precedence to
consumer's interest over other interests while giving advice
to a retail consumer. The definitions and obligations in the
regulations must be the same as those in the section."
2. Compliance measure:
3.2. DEALING WITH CONFLICT OF INTERESTS 39
(a) The regulator has to issue a regulation requiring disclosure of con-
flicts of interest and the duty to give precedence to consumer's in-
terest over other interests while giving advice to a retail consumer.
(b) The definitions and obligations in the regulations have to match
Section 102 of the IFC.
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Has the regulator followed the IFC requirements as outlined in
the Handbook on framing regulations in making the regulations
(board resolution asking for draft regulations, publication of draft
regulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments)?
(c) Does the regulation match Section 102 of the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
40CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.2.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.2.2 Recommendation 14.2.2.(2)
1. Recommendation:
"Document the existing regulations that deal with conflicts of
interest in the sectors regulated by the respective regulators."
2. Compliance measure:
(a) The regulator has to compile a set of all existing regulations that
deal with conflict of interests in the sectors regulated by it and
publish the compilation on its website; and
(b) The regulator has to certify that the compilation is exhaustive.
3. Specific questions to be answered:
(a) Does such a compilation exist?
(b) Has the regulator has certified that the compilation is exhaustive?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
3.2. DEALING WITH CONFLICT OF INTERESTS 41
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.2.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.2.3 Recommendation 14.2.2.(3)
1. Recommendation:
"Create a statement on the consistency between the regu-
lation envisaged in section 102 (Dealing with conflict of in-
terests) of the IFC, and the existing regulations governing
conflicts of interest. Based on this statement, make amend-
ments to sectoral regulations to ensure consistency of regu-
lations with the overarching regulation requiring suitability
assessment."
2. Compliance measure:
(a) The regulator, after issuing a regulation as per recommendation
14.2.2.(1), has to write and publish (on its website) a statement
of consistency between existing regulations, and the regulation
issued as per recommendation 14.2.2.(1);
(b) The regulator has to amend its sector-specific regulations in ac-
cordance with this statement; and
(c) The amendments to the regulations have to follow the regulation-
making process stated in the Handbook.
3. Specific questions to be answered:
· Check regulator's website to see whether such a compilation exists.
· Check whether the regulator has certified that the compilation is
exhaustive.
42CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
4. Steps to be taken by MoF for answering these questions:
· Check regulator's website to see whether a statement of consis-
tency between its regulation and its existing regulations exists;
· Check regulator's website to see whether existing regulations have
been amended in accordance with the statement of consistency;
and
· Check whether the regulator has followed the Handbook require-
ments on framing regulations in amending the regulations (board
resolution asking for draft regulations, publication of draft reg-
ulations along with problem statement, statement of objectives,
cost-benefit analysis and notice for comments).
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.2.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.3 Access to a grievance redress mechanism
3.3.1 Recommendation 14.2.3.(1)
1. Recommendation:
"Document the grievance redress systems: The systems and
processes of the existing de jure grievance redress systems
combining laws, regulations and internal policies should
be documented by each respective regulator. Each regula-
tor should also create and publish a database of consumer
grievances collected over the years."
2. Compliance measure:
3.3. ACCESS TO A GRIEVANCE REDRESS MECHANISM 43
(a) The regulator has to compile a set of all existing laws, regulations
and internal policies that relate to grievance redressal for retail
consumers and published it on its website.
(b) The regulator has to certify that the compilation is exhaustive.
3. Specific questions to be answered:
(a) Does such a compilation exist?
(b) Has the regulator has certified that the compilation is exhaustive?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.3.(1). In any other case, the regulator will
be deemed to have not complied with the regulation.
44CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
3.3.2 Recommendation 14.2.3.(2)
1. Recommendation:
"Identify gaps in de jure and de facto grievance redress sys-
tems: Identify gaps, if any, between the de facto and de jure
arrangements on grievance redress."
2. Compliance measure:
(a) The regulator has to publish a document on its website identifying
gaps in de facto and de jure arrangements on grievance redress.
(b) The regulator has to follow a public consultative process in the
identification of such gaps, and received comments have to be
made public along with the document.
(c) The document on the website has to explain how the comments
received from the consultative process were considered.
(d) The document has to clearly identify legal and administrative
gaps, if any, in its systems of regulating consumer grievance re-
dress.
3. Specific questions to be answered:
(a) Does such a document exist?
(b) Has the regulator has stated in the document that it followed a
public consultative process?
(c) Has the regulator has issued responses to comments received from
the public consultative process along with the document?
(d) Does the document clearly identify any legal and administrative
gaps in the regulator's systems of grievance redress?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
3.3. ACCESS TO A GRIEVANCE REDRESS MECHANISM 45
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.3.(2). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.3.3 Recommendation 14.2.3.(3)
1. Recommendation:
"Close the gap between de facto and de jure: If there are gaps
between the de facto and the de jure, they need to be closed.
As an example, if there are positions which are vacant, then
those posts need to be filled."
2. Compliance measure:
(a) Pursuant to the identification of de jure and de facto gaps in
its regulation of grievance redress mechanisms, has the regulator
taken any steps towards closing the de facto gaps?
3. Specific questions to be answered:
(a) Has the regulator clearly stated on its website the steps it will take
to fill in the administrative gaps in its grievance redress mecha-
nisms?
(b) Is the regulator publishing a monthly status report on its efforts
to fill in such administrative gaps on its website?
46CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
(c) Is the regulator able to report a better enforcement of the exist-
ing laws and regulations on grievance redress by correlating it to
the reduction of administrative gaps (the regulator should publish
such a report on its website once every quarter)?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.3.(3). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.3.4 Recommendation 14.2.3.(4)
1. Recommendation:
"Implement process and information systems as per FSLRC
Draft Indian Financial Code: Chapters 24, 25, 26 and 27 of
3.3. ACCESS TO A GRIEVANCE REDRESS MECHANISM 47
IFC, provide a detailed framework for a comprehensive two-
tiered redress system. This system has two steps in the re-
dress process: mediation and adjudication. It also envisages
use of modern technology to keep the proceedings efficient,
and minimise costs for the consumers. The bulk of these
practices can be implemented in consumer grievance redress
systems operated by all financial agencies."
2. Compliance measure:
(a) Has the regulator issued regulations implementing Chapters 24,
25, 26 and 27 of the IFC ?
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Has the regulation making process been in accordance with the
IFC as outlined in the Handbook?
(c) Does the regulation provides for a two-tiered approach to grievance
redressal (mediation and adjudication)?
(d) Are the powers of mediators and adjudicators are similar to those
given in the IFC ?
(e) Are the processes to be followed by mediators and adjudicators
are similar to those in the IFC ?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
48CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.2.3.(4). In any other case, the regulator will
be deemed to have not complied with the regulation.
3.3.5 Recommendation 14.2.3.(5)
1. Recommendation:
"Consolidate infrastructure: The existing grievance redress
systems under various financial sector regulators can make
efficiency gains if they start using common infrastructure.
This would also reduce the cognitive complexity faced by
consumers, who should see a single point where grievances
can be taken. Eventually when the Financial Redress Agency
comes into existence, there will be one common set of facil-
ities for consumer grievance redress in the financial system.
Progress in this direction can be made by the existing systems
of grievance redress if they plan and start sharing infrastruc-
ture."
2. Compliance measure: The implementation of this recommendation
requires a co-ordinated approach by all regulators. To implement this,
regulators should demonstrate the following:
(a) They have agreed on a common system and infrastructure for
the grievance redressal of retail consumers (the regulators may
have their independent systems as per their regulation of different
sectors. However, the procedure and venue of grievance redressal
must be common).
(b) They have implemented their agreement by:
· agreeing on a common plan of action for creating a common
set of facilities for grievance redress; and
3.3. ACCESS TO A GRIEVANCE REDRESS MECHANISM 49
· implementing this plan of action by finding common office
space, and establishing their staff and technology systems to
enable a common system of grievance redress.
3. Specific questions to be answered:
· Check the websites of all regulators to see whether an agreement
on a common system of grievance redress exists.
· Check whether the regulators have published on their website a
plan of action to implement a common system of grievance redress.
· Check whether the regulators are reporting the progress of their
implementation of this plan of action on their websites (each reg-
ulator should put up a report every quarter stating the progress
made in implementing this common plan of action).
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
50CHAPTER 3. CONSUMER PROTECTION FOR RETAIL CONSUMERS
with recommendation 14.2.3.(4). In any other case, the regulator will
be deemed to have not complied with the regulation.
Chapter 4
Framing Regulations
4.1 Initiating Regulation: Changes & Instru-
ments
4.1.1 Recommendation 14.3.1
1. Recommendation:
"The board of every regulator may pass a resolution stating:
1. Every proposal to frame regulations should be approved
by the board before further work on it is initiated;
2. The proposal to the board should have a clear statement
explaining the need for the regulation, and what the regula-
tion will do;
3. Once the board approves the proposal and the draft regu-
lations have been prepared by the staff, the draft regulations
and other related documents such as the cost-benefit analysis
should be approved by the board;
4. Once the draft regulations and related documents are ap-
proved, the regulator should release the documents for public
comments. The documentation packet that goes out should
satisfy the requirements of the regulation-making process of
the IFC.
5. The board should approve the final regulations after con-
sidering comments from the public and modifications of the
regulation consequent to the comments (if any)."
51
52 CHAPTER 4. FRAMING REGULATIONS
2. Compliance measure: Compliance with this measure requires the
board of the regulator to pass a resolution stating that the regulator
will implement the regulation-making process as recommended in the
Handbook.
3. Specific questions to be answered:
(a) Has the board of the regulator passed a resolution and published
it on its website?
(b) Does the resolution state that work on the drafting of a regulation
will commence only after a proposal regarding the framing of such
a regulation has been approved by the board?
(c) Does the resolution state that the draft regulations along all ac-
companying documents will have to be approved by the board
before the draft regulation and accompanying documents are pub-
lished?
(d) Does the resolution state that after board approval, the draft reg-
ulations and accompanying documents will be published on the
regulator's website for public comments?
(e) Does the resolution state that the board will approve the final reg-
ulations after considering the comments received from the public?
(f) Does the resolution state that the final regulations will be pub-
lished on the regulator's website only after a final approval from
the board of the regulator?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
4.1. INITIATING REGULATION: CHANGES & INSTRUMENTS 53
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.3.1 In any other case, the regulator will be
deemed to have not complied with the regulation.
4.1.2 Recommendation 14.3.2
Statement of objectives
1. Recommendation:
"Instruments: The board of every regulator should pass a
bye-law/resolution stating that every draft regulation will
contain a statement of objectives of the regulation explaining:
1. What the regulatory objectives are;
2. What legal provision(s) empower/obligate the regulator
to pursue those objectives;
3. How the regulations will help the regulator in achieving
the stated objective; and
4. The context in which the regulation is proposed."
2. Compliance measure: The implementation of this recommendation
requires all of the following:
(a) The board of the regulator has to pass a resolution stating that
every draft regulation made public will be accompanied along with
a statement of objectives of the draft regulation;
(b) The statement of objectives has to explain the regulatory objec-
tives, the relevant legal provisions, and an explanation of how the
proposed regulation will solve the problem the regulation seeks to
address.
54 CHAPTER 4. FRAMING REGULATIONS
3. Specific questions to be answered:
(a) Has the board of the regulator passed a resolution and published
it on its website?
(b) Does the resolution state that every draft regulation will be pub-
lished on the regulator's website along with a statement of objec-
tives of the regulation?
(c) Does the resolution state that the statement of objectives will
explain the regulatory objectives of the regulator?
(d) Does the resolution state that the statement of objectives will
state the legal provisions which empower/obligate the regulator
to pursue such objectives?
(e) Does the resolution state that the statement of objectives will
provide an explanation of how the draft regulations will help the
regulator in achieving its stated objectives?
(f) Does the resolution state that the statement of objectives will
explain the factual and legal context in which the reguation is
proposed?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
4.1. INITIATING REGULATION: CHANGES & INSTRUMENTS 55
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.3.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
Problem the regulation seeks to solve
1. Recommendation:
" 1. The board of every regulator should pass a bye-law/resolution
stating that every draft regulation will contain a statement
explaining the problem that the regulation seeks to solve.
2. The board of the regulator should ensure that its staff
writes a detailed manual on how such a statement should be
framed in line with Section 52(2) of the IFC."
2. Compliance measure: The implementation of this recommendation
requires all of the following:
(a) The board of the regulator has to pass a resolution stating that
the staff of the regulator will prepare a manual on how to identify
and state the problem that a regulation seeks to solve;
(b) The board of the regulator has to pass a resolution stating that
all draft regulations will be released along with a statement of the
problem that the regulation seeks to solve; and
(c) The preparation and publication of such a manual on the regula-
tor's website.
3. Specific questions to be answered:
(a) Has the board of the regulator passed a resolution and published
it on its website?
(b) Does the resolution state that the staff of the regulator will write
a manual on how to identify the problem to be solved by the
regulation?
(c) Does such a manual exist on the regulator's website?
56 CHAPTER 4. FRAMING REGULATIONS
(d) Does the manual identify the broad types of problems the regula-
tor seeks to solve while making regulations?
(e) Does the manual set out the parameters by which the regulator
will identify the sort of problem to be solved by the regulation e.g.
market failure in consumer protection, or regulatory compliance
of an existing law?
(f) Does the manual state the information to be contained in the
statement on the problem to be solved?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.3.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
4.1. INITIATING REGULATION: CHANGES & INSTRUMENTS 57
Cost Benefit Analysis
1. Recommendation:
" Instruments:
1. The board of every regulator should pass a resolution
stating that every draft regulation will contain a Cost Bene-
fit Analysis (CBA) of the regulations; and
2. The regulator will draft internal manuals on CBA comply-
ing with the minimum requirements set out in Section 54 of
the IFC, and in-line with international best practices, some
of which have been mentioned as examples in this section."
2. Compliance measure: The implementation of this recommendation
requires the board of every regulator to mandate two things by a board
resolution:
(a) The staff of the regulator should prepare a detailed manual on
CBA, get it approved by the board and publish the manual on
the regulator's website; and
(b) A CBA should be done for every draft regulation and put up on
the regulator's website along with the draft regulation.
Finally, a CBA manual should be prepared and published on the reg-
ulator's website.
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Has the regulator prepared a detailed CBA manual and published
it on its website?
(c) Does the CBA manual comply with the minimum requirements of
Section 54 of the IFC ?
(d) Does the CBA manual or an accompanying statement explain
what international best practices the regulator has referred to
while preparing the manual?
(e) Does the CBA manual contain a statement on how it compares to
other CBA manuals used by financial sector regulators worldwide,
including points of departure from international best practices, if
any?
58 CHAPTER 4. FRAMING REGULATIONS
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.3.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
4.2 Comments on draft Regulations: Recom-
mendation 14.3.3
1. Recommendation:
"The board of every regulator should pass a resolution stat-
ing:
1. Comments/representations will be sought from the public
for all regulations, after the draft regulations have been ap-
proved by the board of the regulator;
4.2. COMMENTS ON DRAFT REGULATIONS: RECOMMENDATION 14.3.359
2. All comments/representations, and responses to the same
will be made publicly available on the website of the regula-
tor.
3. While publishing the draft regulations, the regulator will
provide information on the manner in which representations
should be made, and the time within which representations
should be made; and
4. The regulator should allow representations to be made in
both paper and electronic formats.
5. The regulator should ensure that its staff drafts manuals
to standardise this process and publish such a manual on its
website."
2. Compliance measure: The implementation of this recommendation
requires the board of every regulator to mandate all of the following by
a board resolution:
(a) Comments/representations will be sought from the public for all
regulations, after the draft regulations have been approved by the
board of the regulator;
(b) The regulator will allow comments to be submitted in both elec-
tronic and paper formats;
(c) The regulator will respond to all comments received regarding the
draft regulation;
(d) All comments and the responses of the regulator to such comments
will be made publicly available on the regulator's website;
(e) The staff of the regulator will write a detailed manual on how
comments are to be solicited from the public, how the public may
submit comments, and the time limit for submitting comments.
(f) The website of the regulator will be re-designed to permit the
easy submission of comments in electronic format through the
regulator's website.
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Does the resolution state that comments/representations will be
sought from the public for all draft regulations once they have
been approved by the board of the regulator?
60 CHAPTER 4. FRAMING REGULATIONS
(c) Does the resolution state that comments will be allowed in both
electronic and paper formats?
(d) Does the resolution state that the regulator will respond to all
comments received and publish them on its website along with
the comments?
(e) Does the resolution state that the staff of the regulator will prepare
a detailed manual implementing the board resolution?
(f) Does such a manual exist?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.3.3 In any other case, the regulator will be
deemed to have not complied with the regulation.
4.3. APPROVAL OF FINAL REGULATION: RECOMMENDATION 14.3.461
4.3 Approval of final Regulation: Recommen-
dation 14.3.4
1. Recommendation:
" The board of every regulator should pass a resolution stat-
ing:
1. The final regulations will be published only after they re-
ceive the approval of the board. The board should vote on
the regulations to approve them;
2. The board must consider the comments/representations
received with regard to the draft regulations; and
3. The response of the regulator to the comments should be
made public at the same time as the publication of the final
regulations."
2. Compliance measure: The implementation of this recommendation
requires a compliance with the recommendations given in section 14.3.1
of the Handbook, and can be monitored using the detailed instructions
given in sub-section 4.1.1 of this MIS.
Therefore, while measuring compliance of the recommendations in this
sub-section, MoF should measure whether the measures listed in sub-
section 4.1.1 have been implemented.
3. Final answer: If the answer to all the questions in the MIS Com-
pliance Tracker (for sub-section 4.1.1) is a "Yes", the regulator will
be deemed to have complied with recommendation 14.3.4 In any other
case, the regulator will be deemed to have not complied with the reg-
ulation.
Chapter 5
Notices
5.1 Recommendation 14.4.2
1. Recommendation:
"1. The board of the regulator should pass a resolution defin-
ing the finite list of notices it will send to regulated entities;
2. The board of the regulator should pass a resolution stating
that the regulator will prepare detailed manuals on the min-
imum content of each type of notice, and the circumstances
in which such notice will be issued;
3. The regulators should make manuals governing the stan-
dards and minimum content of the notices, upholding best
principles of governance; and
4. These manuals must be published."
2. Compliance measure: The board of the regulator has to pass a
resolution stating:
(a) The finite types of notices the regulator will issue to entities regu-
lated by it (for guidance, regulators should refer to the IFC, which
contains a finite list of notices that can be issued by regulators.1
Regulators should also consult existing laws governing their oper-
ations and determine various types of notices that may be issued
by them);
1
See Sections 399, 400, 276 and 404 of the IFC
62
5.1. RECOMMENDATION 14.4.2 63
(b) The staff of the regulator will prepare a detailed manual on the
following:
· the minimum information to be contained (legal provision un-
der which notice is being issued, a statement of purpose of the
notice, a statement of the action proposed to be taken before
which the notice is being issued, reasons why the regulator
is contemplating the proposed action, time and manner in
which the recipient may reply to the notice) in all notices to
be issued by the regulator;
· the additional information which different types of notices
may contain;
· the type of notice to be issued for specific regulatory actions
(for example, a show-cause notice should be issued before the
commencement of an investigation)
· the manner in which recipients of a notice from the regulator
can respond to the notice.
· well-defined exceptional circumstances when the requirements
of minimum information can be diluted.
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Does the resolution list the finite types of notices that will be
issued by the regulator?
(c) Does the resolution state that the staff of the regulator will prepare
a manual on notices?
(d) Does such a manual exist?
(e) Does the manual state the minimum information to be contained
in all notices to be issued by the regulator (legal provision under
which notice is being issued, a statement of purpose of the notice,
a statement of the action proposed to be taken before which the
notice is being issued, reasons why the regulator is contemplating
the proposed action, time and manner in which the recipient may
reply to the notice)?
(f) Does the manual contain additional information that different
types of notices will contain?
64 CHAPTER 5. NOTICES
(g) Does the manual state the manner in which the recipients of a
notice can respond to the notice?
(h) Does the manual contain well-defined exceptions when the require-
ments of minimum information can be diluted?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.4.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
Chapter 6
Transparency
6.1 Recommendation 14.5.2
1. Recommendation:
"Implementing the recommendations under the IFC, would
require all regulators to pass internal resolutions requiring
their staff to:
1. Develop rules and processes for capturing the information
that is required to be published under the IFC;
2. Developing and maintaining appropriate information sys-
tems for centralising and storing this information;
3. Developing rules and processes to ensure that all relevant
information is published on the website;
4. Developing and maintaining a web site, through which
this information can be found in a text-searchable format;
and
5. Ensuring that the design of the user interface of the web-
site is clear and accessible as per global best practices."
2. Compliance measure: The board of the regulator has to pass a
resolution stating:
(a) that the staff of the regulator will read the IFC to understand the
standards of transparency required with respect to:
· regulation-making,
65
66 CHAPTER 6. TRANSPARENCY
· accessibility of regulatory information in a text-searchable for-
mat; and
· publication of interpretative statements and guidances.
(b) that the regulator will publish a statement explaining what stan-
dards of transparency it is required to maintain as per the IFC
and the Handbook;
(c) that the staff of the regulator will prepare a detailed manual on
ensuring that all regulatory information is made available on the
regulator's website in a text-searchable format;
(d) that this manual has to explain how the transparency practices of
the regulator will be comparable to global best practices on the
adoption of this manual;
(e) that this manual will contain detailed rules and processes to ensure
that all relevant information is published on the website;
(f) that the regulator will use this manual and re-design its website
and maintain it in such a manner that all information is available
in a text-searchable format; and
(g) that the design of the user interface of the website clear and ac-
cessible as per global best practices.
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Does the resolution state that the staff of the regulator will read
the IFC and the Handbook and prepare a statement explaining
the standards of transparency it is required to maintain?
(c) Has such a statement been published?
(d) Does the resolution state that the staff of the regulator will prepare
a manual on transparency?
(e) Does such a manual exist?
(f) Does the manual explain how the transparency practices of the
regulator will be comparable to global best practices on the adop-
tion of this manual ?
(g) Does the manual contain contain detailed rules and processes to
ensure that all relevant information is published on the website?
6.1. RECOMMENDATION 14.5.2 67
(h) Does the resolution state that the regulator will use the manual
on transparency to re-design its website and maintain it in such
a manner that all information is available in a text-searchable
format?
(i) Has the regulator re-designed its website and made all its infor-
mation available in a text-searchable format?
(j) Does the resolution state that the design of the website and the
user-interface has to be clear and accessible as per global best
practices?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.6.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
Chapter 7
Transparency in Board
Meetings
7.1 Recommendation 14.6.2
1. Recommendation:
"1. The board of every regulator should pass a resolution
adopting the provisions of Schedule 2 (Procedure of meet-
ings of the board of the Financial Agency) of the IFC; and
2. The board of every regulator may pass a resolution to
the effect that the regulator will publish all relevant infor-
mation on its web-site in accordance with international best
practices, some of which have been mentioned earlier in this
section."
2. Compliance measure: The board of the regulator has to pass a
resolution stating:
(a) that it is adopting all the provisions of Schedule 2 (Procedure of
meetings of the board of the Financial Agency) of the IFC ; and
(b) that the regulator will publish on its website all the information
it is required to publish as per Schedule 2 (Procedure of meetings
of the board of the Financial Agency) of the IFC ;
3. Specific questions to be answered:
(a) Does such a resolution exist?
68
7.1. RECOMMENDATION 14.6.2 69
(b) Does the resolution adopt all the provisions of Schedule 2 (Proce-
dure of meetings of the board of the Financial Agency) of theIFC ?
(c) Is the regulator publishing all relevant information pertaining to
board meetings on its website?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.6.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
Chapter 8
Reporting
8.1 Recommendation 14.7.2
1. Recommendation: "The responsibility of implementing this measure
lies with the Central Government.
It should therefore frame rules under existing laws that require regula-
tors to report the following in their annual reports:
1. A review of the regulator's activities in relation to the discharge of
its functions and the achievement of its objectives;
2. All information required to understand the discharge of functions
and the achievement of the objectives of the regulator, that has been
published by the regulator;
3. A statement of deliberations of the board of the regulator, along
with the records of the meetings of the regulator;
4. A statement indicating any statutory obligation that the regulator or
its board has not complied with, and reasons for such non-compliance;
5. A statement by the chairperson of the regulator in relation to the
activities and performance of the board; and
6. A statement of the major activities the regulator will undertake in
the subsequent financial year."
2. Compliance measure: The responsibility of implementing thie rec-
ommendation lies with MoF. It should re-write the reporting rules for
regulators1 under existing laws (and publish them on its website), and
1
The Reserve Bank of India Act, 1934 does not give any powers to the Central Govern-
ment to make reporting rules for the Reserve Bank of India (RBI). Any rules implementing
this recommendation would therefore not be applicable to RBI under existing law.
70
8.1. RECOMMENDATION 14.7.2 71
ask regulators to report the following (in addition to their existing re-
porting requirements):
(a) A review of the regulator's activities in relation to the discharge of
its functions and the achievement of its objectives under existing
laws;
(b) All information required to understand the discharge of functions
and the achievement of the objectives of the regulator, that has
been published by the regulator;
(c) A statement of deliberations of the board of the regulator, along
with the records of the meetings of the regulator;
(d) A statement indicating any statutory obligation that the regulator
or its board has not complied with, and reasons for such non-
compliance;
(e) A statement by the chairperson of the regulator in relation to the
activities and performance of the board; and
(f) A statement of the major activities the regulator will undertake
in the subsequent financial year.
3. Specific questions to be answered:
(a) Has MoF re-written the reporting rules for regulators?
(b) Do the rules state the time within which regulators will have to
start complying with them?
(c) Do the rules require a review of the regulator's activities in rela-
tion to the discharge of its functions and the achievement of its
objectives under existing laws?
(d) Do the rules require all information required to understand the
discharge of functions and the achievement of the objectives of
the regulator, that has been published by the regulator?
(e) Do the rules require a statement of deliberations of the board
of the regulator, along with the records of the meetings of the
regulator?
(f) Do the rules require a statement indicating any statutory obliga-
tion that the regulator or its board has not complied with, and
reasons for such non-compliance?
72 CHAPTER 8. REPORTING
(g) Do the rules require a statement by the chairperson of the regu-
lator in relation to the activities and performance of the board?
and
(h) Do the rules require a statement of the major activities the regu-
lator will undertake in the subsequent financial year?
4. Steps to be taken by MoF for answering these questions: The
implementation of this recommendation has to be done by glsmof.
While monitoring the implementation of this recommendation, MoF
should therefore ensure whether the existing reporting rules have been
modified suitably to implement this recommendation.
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must identify
why the reporting rules do not comprehensively implement the recom-
mendation by
· Providing a statement as to why it thinks the answer to the ques-
tion is a "No"; and
· Steps needed to be taken to improve the rules.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", MoF will be deemed to have complied with
recommendation 14.7.2 In any other case, MoF will be deemed to have
not complied with the regulation.
Chapter 9
Approvals
9.1 Recommendation 14.8.2
1. Recommendation:
"As most of the changes mentioned in section ?? add le-
gal process to the internal functioning of the regulator, the
board of the regulator should pass a resolution to implement
the following:
1. Creation of an internal manual on approval processes to
ensure the processes outlined in the previous section are im-
plemented as per the relevant IFC, provisions; and
2. Mechanisms to ensure that regulated entities are aware
of their rights during the various stages of the approval pro-
cess."
2. Compliance measure: The recommendations in this section flow
from section 9.5.1 (replicated in section 14.8.1) of the Handbook. As
the recommendation states, the outcomes desired in section 9.5.1 re-
quire additions/modifications to the legal process for approvals. The
regulators therefore have to pass resolutions stating:
(a) that the staff of the regulator will prepare a manual on approval
processes to bring about the desired outcomes listed in section
9.5.1 of the Handbook; and
(b) that it will create mechanisms to ensure that regulated entities are
aware of their rights during various stages of the approval process.
73
74 CHAPTER 9. APPROVALS
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Does the resolution state that the staff of the regulator will create
an internal manual on approval processes?
(c) Does such a manual exist?
(d) Does the manual provide information to regulated entities about
(a) the form in which applications have to be made, (b) an ex-
haustive list of supporting documents to be submitted, depending
on the type of approval sought, and (c) the criteria on which ap-
plications will be judged?
(e) Does the manual provide a definite maximum time limit (not
range) within which the application for an approval will be judged?
(f) Does the manual state that before an approval is rejected the
applicant will be given (a) a chance to present its case before the
regulator, and (b) the reasons for the rejection?
(g) Does the manual create a detailed process to ensure that whenever
the deadlines for approving applications are not met, the fact and
reason for delay is communicated to a superior officer or author-
ity within the regulator to review the reasons for delay and take
corrective actions?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
9.1. RECOMMENDATION 14.8.2 75
5. Non-compliance: For every answer that scores less than 100 in the
MIS Compliance Tracker, and therefore a "No", MoF must provide the
following:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.8.2 In any other case, the regulator will be
deemed to have not complied with the regulation.
Chapter 10
Investigation
10.1 Recommendation 14.9.2
1. Recommendation:
"As most of the changes mentioned here add legal process to
the internal functioning of the regulator, the board of the reg-
ulator should pass a resolution to implement the following:
1. Creation of an internal manual on investigations to ensure
the processes outlined in the previous section are implemented
as per the relevant IFC, provisions; and
2. Mechanisms to ensure regulated entities know of their
rights during various stages of investigation."
2. Compliance measure: The implementation of the recommendations
in this section require that a comprehensive manual be drafted with
regard to investigations. The manual should implement the changes
suggested in section 14.9.1 of the Handbook. To do so, the board of
the regulator has to pass a resolution stating that:
· the staff of the regulator will write and publish an internal manual
on investigations based on IFC principles; and
· the regulator will implement mechanisms to ensure that regulated
entities are informed of their rights during investigation process.
The regulator must act accordingly and put up the resolution, the
internal manual and method of informing regulated entities of their
rights during investigation, on its website.
76
10.1. RECOMMENDATION 14.9.2 77
3. Specific questions to be answered:
(a) Does a resolution on investigations exist?
(b) Does the resolution state that the staff of the regulator will cre-
ate a comprehensive manual on investigations complying with the
relevant portions of the IFC ?
(c) Does a manual on investigations exist?
(d) Does the manual on investigation state that there will be one
designated officer of the regulator's staff in-charge of a specific
investigation?
(e) Does the manual require the investigating officer(s) to first identify
the objective of the investigation with reference to specific legal
violations?
(f) Does the manual state that every investigation will have to be nar-
rowly defined in scope and be completed within a pre-determined
time-frame, with a provision for review if the investigation is not
completed within a specified time-frame?
(g) Does the manual state that investigators will have to provide rea-
sons for requiring the presence of persons or collection of docu-
ments?
(h) Does the manual state that the investigator(s) will (a) use proce-
dures designed to cause the least amount of burden on regulated
entities, (b) keep investigations confidential, and (c) make regular
reports to a superior officer on the progress of the investigation?
(i) Does the manual state that investigations should be (a) closed
through a formal closure report, and (b) regulated entities being
investigated should be informed of the closure of the investigation
and supplied all information relied upon during the investigation?
(j) Does the manual create mechanisms to ensure regulated entities
know of their rights during various stages of the investigation?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
78 CHAPTER 10. INVESTIGATION
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.9.2. In any other case, the regulator will be
deemed to have not complied with the recommendation.
Chapter 11
Adjudication
11.1 Recommendation 14.10.2
1. Recommendation:
"The board of every regulator will have to draft internal bye-
laws and manuals to implement this measure. Therefore the
board of the regulator may pass a resolution to do the follow-
ing:
1. Draft bye-laws/manual on enforcement proceedings in com-
pliance with Sections 399, 400, 401, 402 and 403 of the IFC;
and
2. Create the position of administrative law officers as inde-
pendent of the investigation and enforcement staff to judge
the findings of the enforcement staff. Administrative law of-
ficers should be the sole authority responsible for writing and
communicating decision orders."
2. Compliance measure: To comply with this recommendation the reg-
ulator has to estabish an adjudicatory process as given in section 14.10.1
of the Handbook. In order to do so, the board of the regulator must
pass a resolution stating:
(a) that its staff will draft a manual on enforcement proceedings in
compliance with Sections 399, 400, 401, 402 and 403 of the IFC ;
and
(b) that the regulator will create the position of administrative law
79
80 CHAPTER 11. ADJUDICATION
officers as independent of the investigation and enforcement staff
to judge the findings of the enforcement staff. Administrative law
officers should be the sole authority responsible for writing and
communicating decision orders.
3. Specific questions to be answered:
(a) Does such a resolution exist?
(b) Does the resolution state that the regulator's staff will prepare an
enforcement manual in compliance with Sections 399, 400, 401,
402 and 403 of the IFC ?
(c) Does such a manual exist?
(d) Does the manual state that a show-cause notice will be issued
before any enforcement action is taken against a regulated entity?
(e) Does the show-cause notice contain the requirements mentioned
in Section 400 of the IFC ?
(f) Does the manual state that every show-cause notice will state how
the noticee will be given an opportunity to be heard, including a
hearing before the concerned officer (the hearing may be oral, or
through electronic communication)?
(g) Does the manual state that the show-cause notice must also state
that the noticee has access to the material relied upon while issu-
ing the show-cause notice?
(h) Does the manual state that the show-cause notice will provide the
noticee at least 28 days to make representations to the regulator?
(i) Does the manual state that the final order by the regulator will
be in the form of a decision order as defined in the IFC, and
contain (a) the reasons for the decision taken, (b) the material
relied on while taking the decision, and (c) state the noticee's
right to appeal to an appellate authority, and the procedure for
making such review?
(j) Does the manual state that the final action taken and commu-
nicated via the decision order has to be the one proposed in the
show-cause notice?
(k) Does the manual clearly state the role and responsibilities of ad-
ministrative law officers?
11.1. RECOMMENDATION 14.10.2 81
(l) Have the positions of administrative law officers been created?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.10.2. In any other case, the regulator will be
deemed to have not complied with the recommendation.
Chapter 12
Imposition of Penalty
12.1 Recommendation 14.11.2
1. Recommendation:
"As most of the changes mentioned in section 12.5.1 add le-
gal process to the internal functioning of the regulator, the
board of the regulator should pass a resolution to implement
the following:
1. Review existing practices of imposing penalties and har-
monise them.
2. This should be done through creation of a manual that
details the principle of proportionality the regulator will use
for imposing penalties. The manual should be consistent with
the IFC provisions mentioned in section 12.2 above."
2. Compliance measure: To comply with this recommendation, the
board of the regulator has to pass a resolution to:
(a) review the existing practises of imposing penalties and harmonise
them;
(b) create a manual detailing the principles of proportionality to be
used while imposing the penalties.
The regulator must act accordingly and put up the resolution, result
of its review, plans for harmonisation and the manual on its website.
3. Specific questions to be answered:
82
12.1. RECOMMENDATION 14.11.2 83
(a) Has the board of the regulator passed a resolution on penalties?
(b) Does the resolution require the staff of the regulator to review
existing practices on the determination and imposition of penalties
and harmonise them?
(c) Has the regulator published a statment on its website explaining
how it has reviewed the existing practises of imposing penalties
and how it has harmonised them in its manual on penalties?
(d) Does the resolution require the staff of the regulator to prepare a
manual on penalties and publish it?
(e) Does such a manual exist?
(f) Does the manual on penalties apply a principle of proportionality
as stated in the IFC ?
(g) Is the manual consistent with the IFC provisions mentioned in
section 12.2 of the Handbook?
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
84 CHAPTER 12. IMPOSITION OF PENALTY
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.11.2. In any other case, the regulator will be
deemed to have not complied with the recommendation.
Chapter 13
Capacity Building
13.1 Recommendation 14.12.1
1. Recommendation:
"1. MoF and Department of Economic Affairs (DEA) will
build internal capacity and expertise on the Report of the Fi-
nancial Sector Legislative Reforms Commission, and in par-
ticular, on the twelve measures regulators voluntarily agreed
to implement.
2. DEA will design effective mechanisms to co-ordinate with,
and assist regulators in their implementation of these twelve
steps (including strengthening the Financial Stability and De-
velopment Council (FSDC))."
2. Compliance measure: The responsibility of implementing this rec-
ommendation lies with MoF. In order to implement this recommenda-
tion, MoF will do the following:
(a) Conduct workshops, conferences and training sessions for its staff
every month on the Report of the Financial Sector Legislative Re-
forms Commission.
(b) Conduct workshops and conferences for the staff of regulators on
the Report of the Financial Sector Legislative Reforms Commis-
sion and the Handbook
(c) Use the MIS to assist regulators in implementing the Handbook.
85
86 CHAPTER 13. CAPACITY BUILDING
3. Specific questions to be answered:
(a) Has MoF conducted workshops or training sessions for its staff on
the Report of the Financial Sector Legislative Reforms Commis-
sion ?
(b) Has MoF conducted workshops or training sessions for the staff
of regulators on the Report of the Financial Sector Legislative Re-
forms Commission and the Handbook?
(c) Has MoF been monitoring the implementation of the Handbook
monthly and publishing the MIS on its website every month?
4. Steps to be taken by MoF for answering these questions:
· Check the MoF's website for the information.
· If the information does not exist on the website, this recommen-
dation has not been implemented.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", MoF will be deemed to have complied with
recommendation 14.12.1. In any other case, the MoF will be deemed
to have not complied with the recommendation.
13.2. RECOMMENDATION 14.12.2 87
13.2 Recommendation 14.12.2
1. Recommendation:
"DEA will design and initiate training and certification pro-
grams for staff of regulators, in order to bring them up to date
on recent developments in financial regulatory governance,
and common principles necessary to harmonise financial sec-
tor regulation. This will include the following processes:
1. The DEA will build a curriculum and testing infrastruc-
ture for certification tests for staff of regulators. Institutions
like the National Institute of Securities Markets (NISM) and
the National Institute for Bank Management (NIBM) will be
encouraged to implement the curriculum in their programs;
2. The curriculum will broadly test knowledge of:
(a) Hundred small steps1 ;
(b) FSLRC Analysis and Recommendations2 ;
(c) Report of the High Powered Expert Committee on Mak-
ing Mumbai an International Financial Centre3 ; and
(d) Report of the Working Group on Foreign Investment4 .
3. Thirty-three percent of all existing staff employed with a
regulator at the commencement of this certification program
should pass the certification test every year. All new employ-
ees should also be required to pass this test within a year of
the commencement of their employment. In this manner, all
staff members of financial sector regulators will be adequately
trained within a horizon of three years."
2. Compliance measure: The responsibility of implementing this rec-
1
Committee on Financial Sector Reforms, Hundred small steps, Report of the Com-
mittee on Financial Sector Reforms, Planning Commission of India, Sept. 12, 2008, url:
http://planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf (visited
on Dec. 1, 2013).
2
Financial Sector Legislative Reforms Commission, FSLRC Analysis and Recommen-
dations, Mar. 2013, url: http://finmin.nic.in/fslrc/fslrc_report_vol1.pdf.
3
High Powered Expert Committee on Making Mumbai an International Financial Cen-
tre, Report of the High Powered Expert Committee on Making Mumbai an International
Financial Centre, Ministry of Finance, Feb. 10, 2007, url: http://finmin.nic.in/the_
ministry/dept_eco_affairs/capital_market_div/mifc/mifcreport.pdf (visited on
Dec. 1, 2013).
4
Working Group on Foreign Investment, Report of the Working Group on Foreign
Investment, Department of Economic Affairs, Ministry of Finance, July 30, 2010, url:
finmin.nic.in/reports/WGFI.pdf (visited on Dec. 1, 2013).
88 CHAPTER 13. CAPACITY BUILDING
ommendation lies with DEA. In order to implement this recommenda-
tion, DEA will do the following:
(a) Build a curriculum for a certification program for the staff of regu-
lators in order to bring them up to date on recent developments in
financial regulatory governance, and common principles necessary
to harmonise financial sector regulation.
(b) Build a certification program along with the necessary infrastruc-
ture and technology to enable the staff of regulators to take the
test.
(c) Encourage NISM, NIBM and similar institutions to implement the
curriculum in their programs.
(d) Ensure that all regulators get their staff to take the certification
test every year, and DEA should monitor if thirty-three percent
of the regulator's staff has actually cleared the test.
3. Specific questions to be answered:
(a) Has DEA built a curriculum for a certification program for the
staff of regulators?
(b) Has DEA designed a certification program along with the neces-
sary infrastructure?
(c) Has DEA made best efforts to encourage insitutions like NISM
and NIBM to implement the curriculum in their programs?
(d) Is DEA monitoring whether thirty-three percent of the staff of
every regulator is clearing the certification program every year?
4. Steps to be taken by MoF for answering these questions:
· Check the MoF's website for the information.
· If the information does not exist on the website, this recommen-
dation has not been implemented.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
13.3. RECOMMENDATION 14.12.3 89
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", MoF will be deemed to have complied with
recommendation 14.12.2. In any other case, the MoF will be deemed
to have not complied with the recommendation.
13.3 Recommendation 14.12.3
1. Recommendation:
"All financial agencies need to issue regulations which require
15 per cent of all existing staff of all financial firms to pass the
certification test every year. This would ensure that within
a horizon of three years, a large swathe of individuals within
financial firms would also possess adequate knowledge about
the policy and legal environment."
2. Compliance measure: The responsibility of implementing this rec-
ommendation lies with the regulators. They will have to pass regula-
tions directing all regulated entities that 15 percent of their staff pass
the certification test every year.
3. Specific questions to be answered:
(a) Does such a regulation exist?
(b) Does the regulation state that 15 percent of the staff of all regu-
lated entities under their jurisdiction have to take the certification
test every year?
(c) Are regulators monitoring and reporting whether this regulation
is being complied with on an annual basis?
90 CHAPTER 13. CAPACITY BUILDING
4. Steps to be taken by MoF for answering these questions:
· Check the regulator's website for the information.
· MoF should not at this stage, request or issue any instruction to
the regulator to place the information on its website.
· If on an analysis of the information available, it is concluded
that the specific question has not been answered, the degree of
compliance/non-compliance should be identified and steps to en-
sure compliance should be suggested in the MIS Compliance Tracker.
· Report the exact location of the information on the website, and
the degree of compliance/non-compliance with the recommenda-
tion in the MIS Compliance Tracker.
· Report the final objective score in a "Yes"/"No" manner in the
MIS Compliance Tracker.
5. Non-compliance: For every answer that scores less than 100 in MIS
Compliance Tracker, and therefore a "No", MoF must provide the fol-
lowing:
· A statement as to why it thinks the answer to the question is a
"No"; and
· Steps needed to be taken to improve compliance.
6. Final answer: If the answer to all the questions in the MIS Compli-
ance Tracker is a "Yes", the regulator will be deemed to have complied
with recommendation 14.12.3. In any other case, the regulator will be
deemed to have not complied with the recommendation.
13.4 Recommendation 14.12.4
1. Recommendation:
"DEA will initiate a joint mechanism through which indi-
viduals from all financial agencies will attend workshops and
conferences on financial policy and regulation, taking place
through the year, to foster capacity building at senior levels.
This will partly utilise workshops and conferences which are
already taking place, and will partly initiate de novo activi-
ties."
13.4. RECOMMENDATION 14.12.4 91
2. Compliance measure: The responsibility of implementing this rec-
ommendation lies with DEA. The implementation of this recommen-
dation can be achieved by implementing recommendation 14.12.1 as
detailed in section 13.1.
3. Final answer: the implementation of recommendation 14.12.1 will be
used to monitor the implementation of this recommendation. If the
answer to all the questions in the MIS Compliance Tracker for recom-
mendation 14.12.1 is a "Yes", the regulator will be deemed to have
complied with recommendation 14.12.4. In any other case, the regula-
tor will be deemed to have not complied with the recommendation.
92 CHAPTER 13. CAPACITY BUILDING
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