Often at the receiving end of the companies for its penal actions and ‘tough’ regulations, markets watchdog Sebi has said the corporates carry a lot of clout and keep testing its resolve, but the regulator has always been firm on its ground.
At the same time, it is always “generous” and open to reasonable suggestions from the corporates, Sebi chief U K Sinha said, but regretted the fact that companies often come out with such “suggestions” after new regulations have already been framed.
Among others, such suggestions have been made by the corporates in cases like new norms for minimum public holding and delisting, while there have been voices of discomfort in the industry on requirements for minimum one woman director on the boards of listed companies.
Besides, the new insider trading norms of Sebi have also been criticised in some quarters, with Biocon chief Kiran Mazumdar Shaw going to the extent of calling the new regulation ‘draconian’. Some industry leaders had earlier said that Sebi was like a ‘dragon’.
“You see, what happens is that the corporates generally keep testing you. They test your resolve. They test how serious you are and how determined you are. And, they obviously have lot of clout in the country as a class,” the Sebi Chairman said.
“What Sebi has been doing for last several years is to have a very effective consultation process. My feedback is that in the consultation process, often they do not take enough interest.
“If they had taken interest and come out with things which are reasonable, Sebi can easily accommodate them. After something is done, then the voices are raised.
“For us it becomes a problem because since we have already taken a decision, how should we change it,” he said.
Sinha further said that Sebi has still been “quite generous and willing to accept genuine demands” even if it has been raised at a later stage.
“However, if a demand has been raised at a later stage, then we have to again follow a process and it becomes an entirely new process and therefore it takes time,” he said.
Sinha said that some people had expressed their concerns about the new delisting regulations.
“People had the main grievance about our reverse book building process. Because in this process, the earlier requirement for price discovery was that the highest price, which even one shareholder had offered, that would become the determined price.
“Obviously it was prone to be misused and there was a defect in that. So we have now come with a mechanism that the price at which the whole book gets built, that would be the price. That is a very reasonable thing and nobody can manipulate that. So, we have introduced that,” he said.
Sinha further said that Sebi also discovered that in the delisting process in the past, people had got away with delisting by having just 2-3 shareholders participating in it.
“It is important for the sanctity of the system that a good percentage of the minority shareholders participate in the process. So, we put a condition that at least 25 per cent of minority shareholders should participate.
“But we were told (by the industry later) that physically ensuring 25 per cent participation was not possible. Our worry was that are companies making enough efforts to reach out to the 100 per cent of the minority shareholders,” he said.
Therefore, Sebi finally decided to put a condition that company promoters also need to reach out to 100 per cent of minority shareholders.
“Either you meet the condition that at least 25 per cent have come to you and tendered their shares, or 100 per cent have been approached for this and you have a proof for that. Then it is done,” he said.