Two words in the title deserve some explanation. It is important first to understand what do we mean by this common word excellence. Excellence is distinct from perfection. Perfection goes beyond excellence, it has a mathematical precision, it is the Absolute – “purnam” in Sanskrit. There is nothing like “more” perfect. But excellence is a continuous process, a progression. For example, we often say, the person is doing several things, but is excelling in a particular activity.

The Vedas talk about “utkrishtata” or excellence. Excellence, it says needs to be pursued in a holistic manner for the realisation of vikash (development), shanti (peace), kusalam (welfare). In ancient Greece, on the similar lines, excellence or arete — meant fulfilment — something striven for throughout one’s life.

Next is the word TAO. Irrespective of whether the Chinese philosopher Lao Tzu (or Laozi) to whom Taoism is usually attributed to, existed or not, or was he one person or many, in most belief systems, the word Tao is used symbolically in its sense of “way” as the right or proper “way” of existence, based on certain tenets. One can think of an excellent Regulator, in terms of Tenets which the Regulator follows in its workings, its Activities or Actions based on those tenets and the Outcomes of the activities and actions. Taken together, these three would then form the “TAO” of an excellent regulator — the way, the path, the principles of thinking of an excellent regulator.

The actions or the day-to-day workings of any regulator, be it of the securities market or any other domain, based on the following tenets would distinguish an excellent regulator from a merely good one. Of course there could be others too, but to my mind these are the critical ones.

Adherence to the highest standards of integrity and fairness: Integrity and fairness must be integrated into the belief system of the regulator and permeate through all the layers of the organisation. A culture or an ethos of excellence should pervade the regulator’s organisation.

The regulator should be fair in its policy formulation, implementation, in its dealing with all intermediaries and taking action for market intransigence as required under law.

The regulator’s internal administrative rules need to be clear and well understood in the organisation and its internal vigilance system watchful, taking care to maintain a balance, so that fear of vigilance does not sap spontaneity, innovativeness and drive in the organisation.

Even-handedness: All knowledge does not rest with the Regulator alone. An excellent regulator should engage with all segments in the domain of the regulator, dealing fairly with all affected interests so that the regulator’s policies are informed by the genuine need of the domain participants and a quick remedial action can be taken when necessary. An excellent Regulator cannot function from within a glass bubble. It must also understand that it is not there to win a popularity contest.

Fidelity to law: It is almost a tautology to say that an excellent regulator would function faithfully within its own statute and the regulations framed by it, and other applicable laws which the regulator is directed by a statutory authority to implement.

Listening skills: An excellent regulator should hear everyone who has interests at stake in the regulator’s decisions. It will help the Regulator understand if its decisions are positively or adversely affecting others and if its policies are making the desired impact.

Responsiveness: Connected with the above is the need for an excellent regulator to explain its decisions fully, sincerely and transparently by giving reasons and arguments for its actions, in its statements, pronouncements and regulatory orders, including where it decided not to act.

Speed of action: An excellent regulator must be quick and proactive in its actions. It must be speedy in its responses especially when dealing with exigent situations and in meeting out fair punishments with reasoned orders, so that it is not accused of high handedness.

Commitment to public interest: An excellent regulator would need to demonstrate that it is at all times, serving public interest first and not being expedient or is biased toward select private interests.

Analytical capability: An excellent regulator must have the machinery to swiftly gather reliable data, technical skills and competency to analyse the data and draw inferences which will support its decisions and regulatory orders, especially following surveillance action and investigation.

These Tenets distil the essence of regulatory excellence. The regulator’s ability to merge utmost integrity, empathic engagement, and stellar competence with its Activities, Actions and the Outcomes, holds the key to the regulator transforming itself from being a good to an excellent regulator. That is the way, the TAO, to the summit of regulatory excellence.

Till 2006, the writer was an Executive Director of Securities and Exchange Board of India, which he joined at its inception in 1988, a Consultant to the World Bank and IFC; an Independent Director, Senior Advisor to Deloitte Tohmatsu Touche LLP India

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