The Hindu Business Line : Street-smart SEBI

KEEPING THE SECURITIES Exchange Board of India in tune with market trends and credible in implementing its regulatory framework has to be at the top of the agenda of the new Chairman, Mr M. Damodaran. Over the past decade, SEBI has put in place a regulatory framework that is robust in terms of coverage. It should have moved on to the more crucial phase of becoming an efficient regulator whose actions serve as a deterrent against errant market players and companies. But it has not made much headway in tackling the widespread market price manipulation, especially ahead of key corporate announcements, in the shape of informed- and insider-trading. This is no doubt a difficult malpractice to tackle. Even the Securities and Exchange Commission in the United States has managed few insider-trading convictions. But its track record in enforcement and surveillance has been good enough to bring out many cases though these may be settled by payment of penalties (even if guilt is not admitted to). That the SEC is keeping a watch and will come down with stiff penalties has been deterrent enough. SEBI has a long way to go before it attains such a status.

SEBI's credibility has suffered immensely by the legal reverses. In a number of cases — especially those involving prominent outfits/persons — its decisions have been overturned. This has dented its credibility. Framing watertight cases that would stand scrutiny on appeal and ensuring that SEBI's decisions are upheld are crucial if the regulator is to be taken seriously. To enhance the quality of its operations, the regulator has to focus on improving the skill-sets at its disposal in two ways: Hiring top-notch personnel with expertise in markets and finance; and decentralising the scrutiny of information by placing in the public domain all reports filed by market players, companies and other institutions. To achieve the first, SEBI needs to ensure that its compensation and the work culture are appealing enough to attract talent.

The scope of information disclosure has to be enhanced so that market operations can be subjected to wider scrutiny. No doubt, the breadth of disclosures has improved over the years but more can still be done. For instance, SEBI can direct companies holding analyst meets and conference calls involving institutional investors to make them available simultaneously on the Web/newswires or at least place the transcript in the public domain after the event. The SEBI Web site can do with a substantial restructuring to make it user-friendlier with clearly identified pathways for different segments of information. Currently, even mere access more often than not proves to be difficult. Mr Damodaran, who has assumed office, comes with a track record that inspires confidence and consequently public expectations are bound to be high. It is to be hoped that these aspects will not escape his attention.

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