The job of the regulator is not for the tiny hearts. Not that it has to deal with blood-curdling actions like climbing a snorkel ladder to the 32nd floor to fight a fire or rescue someone, or taking a deep dive to the ocean bed to search for the remnants of a submerged ship, rather with activities which involve much less physical effort, such as work related to regulating, nurturing and developing the domain of the regulator, whether it covers environment, energy, power, electricity, financial market and so on and so forth.

These areas carry different categories of risks which deeply affect economic activity, human lives and society at large. One can get some idea from movies like The Big Short, Scam 1992, or Dumb Money.

Societal expectations naturally arise, which can at times be daunting and managing those, even more.

The characteristics of good regulation are not limited to legalistic rules and techniques, however good those may be. The constituency of the regulator is not satisfied only with laws, rules, regulations and techniques. They want to see how the wherewithal and appurtenances are used to serve their need.

They expect not only response, but speedy response; they expect that the regulator will pay attention to all their problems and concerns; the regulator should be predictable and regulatory actions should be proportionate to the risks intended to be covered and benefits sought to be gained.

The expectations are vast and ever increasing and it will hardly be feasible for the regulator to meet all the expectations, of all the members of the constituency, all the time. Besides, often the demands of different segments of the constituency, may be inherently conflicting. The regulator would then have to judge what does most good to the interests of the many.

For example, when the Securities and Exchange Board of India (SEBI) decided to introduce new practices, by abolishing the age old entrenched ones, which made the stock market inefficient, there were strong vested interests which lobbied intensely against SEBI, as they were benefiting from those very practices. But SEBI was convinced about the larger benefit accruing to the securities market and went ahead and successfully implemented the new measures. The stock market benefited.

From frequent interactions with a large number of investors, intermediaries, practitioners, academicians and several thoughtful individuals, at different points of time in nearly two decades that I spent with SEBI, I found that this group of people, with diverse interests, had a plethora of expectations from the regulator.

There is no gainsaying that a regulator does need a plethora of attributes to deal with those expectations. The regulator is expected to be transparent, fair, firm, flexible, consistent, accountable, adaptive, trustworthy, effective, credible, equitable, efficient, timely, and responsive and the list continues to lengthen. It will hardly be an exaggeration to say that if a model of a regulator which could meet all those expectations is built, then the regulator may turn out to be a mixture of Iron Man, Superman, Thor, Spiderman, or the Great Khali.

Overarching qualities

While not undermining the importance of these attributes, nor denying that these are necessary for a regulator to be excellent, what often happens on the ground, is that the regulator brings forth those attributes which are needed to meet what the situation demands.

For example, it must demonstrate timeliness, firmness, and fairness when it comes to dealing with market exigencies, malfeasance or misconduct. For policy action, it must demonstrate that it is able to respond speedily and is mindful, adaptive, trustworthy, effective and credible and, at all times, able to act with swiftness and consistency.

But overarching these qualities, are three — integrity, engagement and competence — which the regulator must possess in abundance and consistently demonstrate that it does so. That will distinguish a competent regulator from an excellent one.

Atul Gawande’s best seller Better: A Surgeon’s Notes on Performance, is about the medical profession, but the points he makes equally apply to the regulator. Gawande shows how doctors try to close the gap between best intentions and best performance in the face of obstacles that sometimes seem insurmountable. “In medicine, as in any profession,” he says “we must grapple with systems, resources, circumstance, people — and our own shortcomings, as well. We face obstacles of seemingly unending variety.

Yet somehow we must advance, we must refine, we must improve.” In the end it is performance that matters. Gawande defines “three core requirements” for successful performance in medicine — diligence, doing right, and ingenuity. This is true for the regulator as well.

Till 2006, the writer was an Executive Director of SEBI, which he joined at its inception in 1988

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