“Markets will set our agenda for 2018,” Ajay Tyagi, Chairman, SEBI, announced in a press conference on December 28, responding to a question about his plan of action for the New Year.

Yet, it is likely that Tyagi and his new team of top officials may end up tackling pending issues and clearing huge backlog of past cases for most of 2018, experts say.

Ever since he took charge as Chairman in March, Tyagi is busy dealing with past issues that saw no action for years. SEBI saw a considerable slow down in enforcement and other areas after CB Bhave moved out as Chairman, insiders say.

There was heightened action in SEBI under Bhave between 2008 and 2011. The regulator led a frontal attack on fraudulent chit fund or collective investment schemes and put the spot light on the Sahara group. It turned out to be a model for regulatory action. For the first time, mutual fund industry saw slew of resignations mainly by chief investment officers as SEBI threatened action against them. Both Mukesh and Anil Ambani-promoted Reliance groups came under SEBI scanner on different accounts of market manipulation. The then SEBI team, including KM Abraham, MS Sahoo and JN Gupta, took few infamous market operators to task and unearthed manipulation and conversion of black money into white via ADR and GDR.

Financial Tech case

Although not granting a ‘fit and proper’ licence to Financial Technologies group to run MCX stock exchange was defeated in the Supreme Court, it was seen in a different light after the collapse of NSEL, promoted by the same group.

Banning entry load for mutual funds to bring down investment cost for retail investors is among the few regulatory diktats of SEBI under Bhave that stood the test of time. But from 2012 up to Tyagi’s appointment, SEBI has more misses than hits. Legal experts say, the same SEBI that recovered and distributed almost entire money to retail investors who were victims of illegal IPO scam and even had Sahara on its knees to deposit huge sums of ill-gotten wealth via chit fund, proved a disappointment in recovering money from other illegal collective investment schemes (CIS).

Huge sums detected under CIS fraud range from ₹49,000 crore in case of PACL (Pearls), to thousands of crores as under Saradha, Rose Valley and other schemes. But SEBI's recovery drive is limited to a few hundred crore of rupees. In fact, SEBI officials came under CBI scanner for shoddy follow-up in the Saradha scam

Under UK Sinha, SEBI mainly stuck to desk job of giving out orders against ponzi schemes on receiving complaints and information from sources but lacked the mettle on paying back small investors who were victims of such schemes.

Rampant CIS fraud was a key reason that SEBI asked for powers to conduct search and seizure and was given the same in 2014. Yet in 2016, when the Supreme Court pulled up SEBI for going slow on CIS frauds, the regulator simply chose to dump around 1,500 cases by arguing they did not fall under its regulatory preview. This passing-the-parcel by SEBI came after it had spent over ₹73 crore by 2016 in public awareness campaigns against unregistered CIS and unrealistic return claims.

Algo case

SEBI's disregard for serious investigations in grave allegations against important institutions was at display until March 2017. The regulator choose to look the other way over NSE’s algo matter until June 2017, when Tyagi said a forensic audit of the exchanges’ systems would be conducted.

In June, Tyagi had expressed concern over some 7,000 cases older than two years pending enforcement and investigation. In February, a note from SEBI's vigilance department had said the same thing.

Commodity market regulation is another area where several tasks are left unfinished. MCX was allowed to launch options trading without setting up clearing house but Metropolitan Exchange was not allowed to launch equity derivatives for the same reason. There were reports of price manipulation in tur dal and castor seeds after SEBI took charge of commodity market but nothing was heard about investigations into it. Members trading in commodity segment have only come down after SEBI got authority over it.

“2018 seems promising for SEBI if one purely goes by Tygai's track record so far,” said a SEBI watcher.

On December 28, Tyagi told reporters that SEBI was looking to bring norms on physical settlement in stock market by March next year, a long pending job. Also, it is facing a January deadline to pass an order against PwC in Satyam matter of 2009. Tyagi had ordered a probe against NSE and 14 of its key officials in the algo case, which came to light in 2015. The issue is expected to be closed in 2018.

There are issues of conflict of interest within SEBI with instances of people being advisers to legal firms and companies and sitting on regulator’s committees which need to be dealt with seriously, experts say.

Related Topics
comment COMMENT NOW