Sebi at 25 seeks greater powers; Govt wants it to be 'fearless'
Mumbai: Celebrating its 25th year, Sebi Friday sought greater powers to take on market manipulators and those raising money from public illegally, while government promised full support and asked it to be a 'fearless' regulator working for the benefit of small investors.
The government also asked Sebi to root out the disease of insider trading from stock markets, take steps for channelising household savings into capital markets and make it easier for foreign investors to invest in India.
Speaking at a function to mark the silver-jubilee year in the presence of Prime Minister Manmohan Singh, Finance Minister P Chidambaram and a host of industry leaders and policymakers, Sebi Chairman U K Sinha said that the journey has been challenging and eventful and it has developed Indian markets as the best in the world.
Noting that the last major amendment to the Sebi Act took place way back in 2002, Sinha also said that time has come to further strengthen the regulatory framework.
"I am sure government would consider that and will take a favourable decision. One area I would like to underline here is the development of illegal money, unauthorised money collection by various entities. I am sure giving regulatory clarity in this area would give lot of impetus to savings of the households in the country," he said.
Reciprocating to the demand, the Prime Minister said that the "government remains committed to doing everything that is needed to strengthen Sebi so that it can deliver even more effective enforcement".
On the other hand, Chidambaram asked Sebi to do its job fearlessly to protect the interest of small investors.
"The final message is be a fearless regulator. Bend before no one, bow before no one, be a fearless regulator," he added.
"Win confidence of small investors. It is when a small investor says my money is safe in the financial market because I have Sebi watching over my money, that is the day when Sebi would have achieved its objective," Chidambaram said.
Sinha further said that as Sebi looks ahead, the challenges "going forward will continue to be how to deal with technologically advanced entities, entities which are financially very strong".
"Sebi will have to continuously upgrade its manpower, its capacities both in technology and manpower so that we can deal with situations which can arise," he said.
The Prime Minister and the Finance Minister also said that Sebi needs to upgrade and improve itself and asked the regulator to work towards mobilisation of household savings into productive investment in the capital markets.
"The retail investors must be provided incentives to invest in financial assets such as securities, insurance products, banking and pension products," Singh said.
On steps needed to take on the market manipulators, Singh said: "A key indicator of Sebi's future effectiveness will be its ability to root out the hard-to-define but extremely pernicious disease of insider trading."
It was during Singh's tenure as Finance Minister when Sebi was given statutory powers in 1992 through the Securities and Exchange Board of India Act. Incidentally, it was around that time the country's biggest stock market scam broke out, involving rogue broker Harshad Mehta.
Sebi got more powers in 1995 and again in 2002, this time after another scam involving Ketan Parekh came to light.
Sinha recalled that Sebi had started functioning in 1988 under its first Chairman S A Dave with just six officers and it has come a long way since then to be regarded as one of the best regulators in the world.
While Sebi's headcount has grown more than 100 times in the past 25 years, Chidambaram said that "the country, the economy and the market are too large and are poised to become larger. We need far more than 600 men and women to regulate the stock market".
Prime Minister said Sebi should also work towards making it easier for foreign investors such as sovereign wealth funds, university funds and pension funds to invest in the country as a priority attention area.
Appreciating Sebi's efforts to enhance the capital market access for mid-cap and small companies, Singh said that steps should also be taken for developing debt markets.
"...Regulation should be guided by the need to increase transparency and lead to higher investments being channelised into productive endeavours, which strengthen our economy," he said.
Sebi chief Sinha termed unauthorised raising of funds by entities as a critical area of concern and promised strict action against such schemes and sought continuing support from the government for the benefit of markets and investors.
He said the government has been supportive to Sebi throughout its journey and he expects the same to continue.
Among other challenges before Sebi, Sinha listed issues like steps to ensure that FIIs continue to invest in India and channelising the household savings into the capital market.
Telecom Minister Kapil Sibal, who was also present on the occasion, released a postage stamp to commemorate Sebi's 25 years. Besides, a book was also released on Sebi's journey, 'From a Banyan Tree to e-trading'.
Singapore's Finance Minister T Shanmugaratnam was a special guest. A host of industry leaders, including Tata group chief Cyrus Mistry, Aditya Birla group Chairman Kumar Mangalam Birla, Uday Kotak, Jet's Naresh Goyal, BSE chief Ashish Chauhan and NSE Managing Director Chitra Ramakrishna were also present there.
Besides speeches and panel discussions on economic and market-related issues, celebrations also included an entertainment programme by satirist Cyrus Broacha.
"In the initial years, the journey of Sebi was quite tumultuous. Sebi had to work as a change agent. These 25 years have been a great journey. Friday, we are among one of the best regulators in the world," Sinha said.
Sinha is the eighth Chairman of Sebi since its inception as an independent regulator in 1988, when the central government headed by then Prime Minister Rajiv Gandhi decided to give a boost to the stock market activities as part of its economic liberalisation drive.
Prior to Sebi, the capital markets were regulated by the Capital Issues (Control) Act of 1947.
The government gave Sebi statutory powers in 1992 through the Securities and Exchange Board of India (Sebi) Act. These powers included mandate to check insider trading and regulate takeovers and other substantial share acquisitions.
Later in 1995, the Securities Law (amendment) Act enhanced Sebi's jurisdiction and its autonomy and gave it powers to take punitive action. Entities like FIIs, rating agencies, venture capital funds and depositories were also brought under its jurisdiction.
Sebi was also given powers to levy monetary penalties, while SAT was set up to give a platform to the aggrieved parties to appeal against Sebi orders.
The next major amendment to the Sebi Act was made in 2002, which gave Sebi powers to seek information and records from banks and many other authorities, as also the powers for inspection of the books of accounts of listed companies.