The Hindu Business Line : `Central Listing Authority will have the final say'

THE Central Listing Authority (CLA) will have the final say in all matters pertaining to listing of securities over and above the Securities and Exchange Board of India. A notification to this effect, which corrects the earlier stated position that SEBI can overrule the CLA in the event of differences of opinion, has been issued last month.

The CLA, which is expected to be operationalised in the next two or three months, will probably have its jurisdiction over capital issues of more than one kind, including preference issues, according to those aware of the development. "These issues should for all practical purposes come within the purview of CLA", a highly-placed source, who did not want to be named, said. The Authority will therefore be quite autonomous and operate independent of SEBI.

The scope of the CLA is expected to be vast, especially in the context of the need for legal modifications. As some quarters in the market feel, there is need to adopt fresh regulations embodying standardised practices. Such measures, for instance, should pertain to offer documents, some of which confuse investors to a large extent. The example of the same offer document bearing various units - lakhs, crores and millions - is cited here.

The primary market has seen a sea change in recent years, and investors have faced a number of tricky situations insofar as the IPO scenario is concerned. There have been very few issues in the last seven or eight years, and only six primary offers each in the last two - compared to over 1,400 in 1995-96.

According to Mr Prithvi Haldea of Prime Database, this reflects the rather poor state of the domestic primary market. While Rs 1,000 crore each was mobilised in the past couple of years, there were only about seven lakh applications in IPOs during 2002-03. In comparison, there were approximately eight crore applications in 1993-94. The rights issue scenario is also not satisfactory; only Rs 400 crore were raised in the whole of last year, he maintained.

"Merely four per cent of the total household savings is in the securities market today... compare this with the high 44 per cent exposure to fixed deposits", he said, adding the situation is a result of many factors working in tandem. These have kept the equity investor away from the market, as he is averse to the `risk of fraud'.

At another level, recent technological advances too are encouraging speculative activity. (read: day trading). "Every few years some fad or other comes up and a hype is created around it. In the past, one saw such hype around sectors like yarn, mini cement, granite, floriculture and NBFCs. And more recently, it has been the turn of IT and media companies," Mr Haldea pointed out, adding that small investors have suffered because of such developments. Their plight, in fact, is compounded because of the decline of regional stock exchanges, he noted.

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