Ajay Tyagi gets 18 months more as SEBI chief

The incumbent SEBI chairman Ajay Tyagi was granted an extension of 18 months on Wednesday.

“The Appointments Committee of the Cabinet approved extending Tyagi's term as chairman SEBI with effect from September 1 to February 28, 2022,” a notification issued by the government on Wednesday said. Tyagi was earlier appointed for three years in 2017 and his term ended in February this year, after which he was given a six month extension up to August 31. In 2022, Tyagi will complete 5 years as SEBI chairman.

Initially, Tyagi was given a five-year term as SEBI chairman in 2017 but it was cut down to three years by a separate notification.

In the coming months, Tyagi could be pitching for an easy access to Government Securities (G-Secs) market for retail investors and forcing stock exchanges to move towards real time settlement of trade. The need for the two moves was stressed upon by Tyagi in his speech at a conference in July.

Tyagi is a 1984 batch IAS officer of Himachal Pradesh cadre. A career bureaucrat for 33 years, Tyagi was relatively less exposed to stock markets than previous two SEBI chairman, who came from financial institutions. Yet, Tyagi’s attempt at solving some core issues in a short time span after joining SEBI made him stand apart, observers say.

Tyagi had recently proposed that G-Secs issuance should follow the stock market model. Speaking at a virtually arranged FICCI conference just days ago Tyagi pitched an idea wherein he said that G-Secs should be dished out in demat format to tap new investors on Dalal Street. As of now, RBI is the monitoring monitoring agency for all the debt programs of the government. G-Secs are issued by RBI and the process of its settlement too is fully controlled by the central bank.

Upfront margin

SEBI under Tyagi has made it mandatory for stock brokers to collect upfront margin in the cash segment. The rule will kick-in from September. The regulator has also discontinued the use of Power of Attorney (PoA) for margin collection and instead asked brokers to use share pledging mechanism. In the derivatives segment, SEBI has also introduced enhanced norms like peak rate of margin collection, which will kick-in from December. Brokers have opposed both collection of margin in cash segment and other norms in derivatives and are calling them draconian.

Co-location case

In his first three years, Tyagi dealt with some of the important pending issues at SEBI. It involved bringing a closure to the Co-location matter at the National Stock Exchange (NSE). In 2019, SEBI gave its final verdict into the matter that was dragging since 2015. Several officials of the exchange were banned for a few years from the market and NSE was asked to disgorge around ₹1,000 crore from its earnings through Co-location. Tyagi was also a witness to two big defaults by stock brokers. It involved Karvy and IL&FS Securities. Karvy had used client shares to avail loan from banks. But SEBI issued certain executive orders wherein the depositories returned shares fraudulently taken by Karvyto its original holders, mainly retail investors. Still there are a few thousand investor complaints pending and Karvy is yet to be declared a defaulter. Following the Karvy mess, SEBI amended the PoA norms.

Most important reform of the Tyagi era has been SEBI's strict norms and penalty rules against credit rating agencies for the lax attitude against companies. With SEBI's new rules rating agencies have to be more careful in ratings and give full information to market players. SEBI recently penalised ₹1 crore to CARE Ratings for lapses.

Under Tyagi, SEBI recently cleared a back-log of nearly 15,000 cases of trading in illiquid derivatives by issuing a one settlement scheme. The scheme could earn the government more than ₹750 crore as brokers indulging in sham trades will have to pay-up a settlement amount decided by SEBI.

However, legal experts say SEBI is yet to fully investigate cases involving fraud by client code modification and use of fake pan cards for commodity trading, both of which are being looked into by income tax.

SAT’s ire

SEBI’s improper handling of investor complaints on its online grievance platform SCOREs, which attracted the ire of Securities and Appellate Tribunal was yet another matter where the regulator came into poor light.

Under Tyagi, SEBI purchased a new office building worth around ₹1,000 crore. After that it agreed to transfer 75 per cent of its surplus from the general fund every year to the Consolidated Fund of India of the Central Government.

A US based trade magazine had named Tyagi among the top ten regulators in the world. Tyagi was ranked at the seventh position. The rankings were part of the World's Most Influential People in Market Structure, also known as The Exchange Invest 1000 (EI1000), which was launched by Patrick Young & Exchange Invest in 2017.

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