New Delhi: It was the need for 'continuity' amid an excessive capital market volatility that led to the government giving second extension to U K Sinha as SEBI chief -- a post for which 50 candidates including top bureaucrats, eminent bankers and senior RBI officers had applied.
Sinha first became the Securities and Exchange Board of India (SEBI) Chairman on February 18, 2011 with a three-year tenure, which was later extended by two years. Days before the end of his tenure in February this year, he was given another extension till March 1, 2017.
The government initiated the search and selection process in July last year to find Sinha's successor and it got as many as 50 applications and later shortlisted seven, as per the details disclosed in reply to an RTI application.
These seven included SBI Chairperson Arundhati Bhattacharya, whose name incidentally did not figure in the list of 50 applicants.
Other shortlisted candidates were Additional Secretary to President, Thomas Mathew, erstwhile Forward Markets Commission Chairman Ramesh Abhishek, SEBI's whole time member Rajeev Kumar Agarwal, Competition Commission member M S Sahoo, former ICICI Bank veteran Madhabi Puri Buch and IDFC's Vikram Limaye.
However, as the process for selecting a new SEBI Chairman was underway, it was decided that Sinha should be given another extension as he was eligible to hold the post till he attained the age of 65 years.
"It was agreed that given the excessive volatility in capital markets now mainly due to external factors, continuity may be desirable for SEBI Chairman," according to the Finance Ministry file notings shared in response to the RTI application filed by PTI.
In reply to the RTI application, the Finance Ministry also gave details of processes, including setting up of a Financial Sector Regulatory Appointment Search Committee (FSRASC) -- headed by Cabinet Secretary, for the appointment of new SEBI chief.
"The process of selection of Chairman, SEBI is underway and two meetings of FSRASC have been held on January 7, 2016 and January 21, 2016. In the meantime as discussed by Finance Minister with Secretary (Economic Affairs), the process of selection of new incumbent of SEBI being underway, the term of U K Sinha may be extended till he attains the age of 65 years or till further orders," said a note dated February 2.
The final order for extending Sinha's tenure, during which a slew of measures have been taken to deepen the markets and safeguard investors, was issued on February 15.
Incidentally, another financial sector regulator RBI will see the three-year tenure of Governor Raghuram Rajan coming to an end this September and speculation is already doing the rounds on whether he would get an extension or not. Many economists and experts favour a second term for Rajan amid the prevailing volatile trends in bond and currency markets.
The debate has got intensified after some sections of ruling BJP voiced their opposition to Rajan's continuance at RBI, while some industry leaders have also been wanting Rajan to be more liberal with rate cuts to lower the cost of capital and boost economic growth.
As per the RTI details, the CVC while providing necessary clearance to Sinha observed while there have been several complaints alleging misconduct of officers of SEBI including the chairman, "nothing specific" has emerged so far warranting a formal disciplinary or criminal proceeding.
"Investigation or inquiry on the issues raised in the complaints are on, through Chief Vigilance Officers-Department of Economic Affairs and CBI. These complaints allege misconduct on the part of several others also. As per feedback received from CBI, no preliminary enquiry or regular case has been registered in Sinha's name.
"In the light of the existing instruction or guidelines, the Commission has therefore accorded clearance in respect of U K Sinha, for the purpose of his reappointment as Chairman, SEBI," as per the CVC findings recorded in the file.
A total of 50 applicants were in fray for the post of Chairman at SEBI, which regulates stock exchanges, various kinds of market entities including brokers, mutual funds, Foreign Institutional Investors, rating agencies and investment bankers and thousands of listed companies.
It included former Minority Affairs Secretary Arvind Mayaram (formerly Economic Affairs Secretary), Former Gujarat Chief Secretary D J Pandian, three RBI functionaries -- Executive Director G Mahalingam, Deputy Governor R Gandhi and Regional Director Supriya Pattnaik, and CCI member U C Nahta.
Some lawyers as well as private sector bankers also applied.
Giving details on names that can be considered even if the person has not applied, a note dated August 10, 2015 by the then Joint Secretary (Finance Ministry) Manoj Joshi said, "Even the last time, U K Sinha did not apply for the post of Chairman. Search-cum-selection committee picked him up directly.
"It may be noted that for some other prominent posts such as Governor, RBI etc applications are not invited from the interested candidates."
With the ongoing second extension, Sinha would be in office for little over six years -- the second-longest for this position after D R Mehta's seven-year term from 1995 to 2002.