SEBI is not an activist: Sinha

Our Bureau New Delhi | Updated on March 12, 2018

U.K. Sinha, Chairman, SEBI, at the 7th international convention of the Association of National Exchanges Members of India, in New Delhi, on Saturday. — Kamal Narang

Says regulator is trying to build investor trust in the capital market

Asserting that securing the trust of investors was crucial to sustain capital market growth, SEBI Chairman U.K. Sinha rued on Saturday that recent scams and market misconduct had eroded investor trust.

Sinha also said criticism that SEBI was playing an “activist” role in disciplining errant businesses was unfounded as the regulator was only looking to build long-term trust in Indian markets.

He was speaking at the 7th international convention of the Association of National Exchanges Members of India.

“Whether you like it or not, we have to respond to the needs of society and we have to be guided in long-term growth. So, I don’t think we are trying to be activists, as what we are trying to do is generate long-term trust in the Indian market,” he said.

Sinha made a case for channelling long-term retirement funds into the equity market. It makes eminent sense for workers’ long-term funds to be invested in equities, he said.

Pension funds in equity

It is the absence of trust that has prevented the trustees of the Employees Provident Fund Organisation (EPFO) from parking long-term retirement funds in equities, added the SEBI Chairman.

Sinha’s remarks are significant as currently none of the provident funds or pension funds with the EPFO invests in the equity market.

This is despite Finance Ministry regulations allowing as much as 15 per cent of the EPFO’s investible funds to be parked in equities and related instruments.

“A lot of work needs to be done in this area. There is also a need to improve corporate governance practices in our companies.” The SEBI Chairman said that any scam or market manipulation dents trust in the capital markets. “Each scam or misconduct takes the capital market back by 10 years. The entire trust is eroded after such episodes,” he said, indirectly referring to the 2013 National Spot Exchange Ltd episode.

He also pointed out that over two-thirds of initial public offerings launched in recent years were now quoting below their issue price.

“We, in SEBI, have taken note of it,” he said, indicating that the capital market regulator may, in the coming days, even look at different processes for the vetting of offer documents.

Currently, SEBI neither approves nor rejects offer documents.

The capital market regulator only issues observations on the offer documents.

New governance code

Speaking to reporters on the sidelines of the event, Sinha said that at its next board meeting, SEBI would consider approval of the new corporate governance code for listed companies.

Indications are that the regulator may allow a corporate governance rating as part of this new code.

Three game-changers

National Stock Exchange Managing Director and Chief Executive Chitra Ramakrishna said there are three game changers that could help the market sustain and accelerate growth.

One is bringing in more pension funds; second is encouraging active and passive funds, such as exchange-traded funds; lastly, plugging gaps by bringing in missing products in the derivatives segment, she said.

Globally, between April 2012 and October last year, as many as 160 new derivative products were launched, added Ramakrishna.

Published on January 11, 2014

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