SEBI Chairman UK Sinha on Friday called for further strengthening of Parliamentary oversight on the regulations framed by various regulators while noting that regulatory institutions cannot escape the scrutiny of their working and have to be held accountable.

Although most of the time regulations framed by regulators do not need approval from the government of the day or from Parliament, there is a need to strengthen the mechanism of Parliamentary oversight on them, Sinha said while delivering the 19th JRD Tata Memorial Lecture in the capital.

“It is doubtful whether the hundreds of regulations framed are ever scrutinised by the parliamentary committees or whether the activities are sufficiently under the radar of Parliament,” Sinha said.

The level to which legislative proposals get the attention of Parliamentary committees need to be extended to subordinate legislations framed by regulators — who have evolved into mini-States — as well, he noted.

There is also need for the parliamentary committees to be empowered in order to have sufficient number of experts to aid and advise them for a ‘structured review’ of the working of the regulators, he said.

Sinha said that regulators cannot escape the blame for sub-optimal application of their authority, even if their powers were limited. Part of the reason for recurrence of mass misconduct episodes is the lack of conviction towards delegating State powers to an arms-length independent agency, he said.

“There is an element of hesitation (on the part of the government) in undertaking this delegation. The fact that many of the regulatory bodies function in highly technical and complex areas adds to the hesitation,” Sinha said.

Sinha noted that the SEBI Act would not have been enacted if the Harshad Mehta scam had not taken place. Almost every subsequent amendment of SEBI Act has been undertaken after a grave episode has highlighted lacuna and shortcoming in its legal provisions. Often these changes have been brought about through ordinance first without waiting for a formal enactment.

Sinha also said it was time to pause and think “whether we are creating too many institutions to ensure accountability or should we aim towards more accountability in more institutions”.

He cautioned the large companies as well about the narrative of public accountability now extending to corporates; a phenomenon earlier restricted to politicians and bureaucrats.

Reminding corporates of the changing environment where there is more scrutiny, Sinha raised the issue of corporate compensation at the senior levels.

Citing global examples, he said companies after companies are paying exorbitantly high compensation to their CEOs even if they are making losses.

“In the FTSE 100 companies, the CEO’s pay is 180 times more than the average pay of employees. In the USA, the pay of S&P 500 CEO was 204 times more than the median pay of workers in 2015....”

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