Had Harshad Mehta scam not happened, the Sebi Act would not have been enacted, the regulatory body’s chief U K Sinha said today, underlining that every subsequent amendment to the law came after a “grave episode”.
The extent of delegating powers to regulators for protecting public interests is often a matter of intense debate, the Sebi Chairman said, adding that such debates are not unique to India.
“While the foundation of Sebi was laid in 1988, the Sebi Act would not have been enacted if the Harshad Mehta scam had not happened.
“Almost every subsequent amendment of Sebi Act has been undertaken after a grave episode has highlighted lacuna and shortcoming in its legal provisions. Often, these changes have been brought about through ordinance first without waiting for a formal enactment,” Sinha said.
Mehta was an Indian stockbroker who hit the headlines for the notorious security scam of 1992 and was engaged in a massive stock manipulation scheme.
Sinha said also mentioned that the US SEC came into existence after millions of people lost their savings during the Great Depression.
“US SEC (Securities and Exchange Commission) could not have been created if millions of people had not lost their life long savings in the decline of the securities market during the Great Depression,” he said.
Giving the JRD Tata Memorial lecture, Sinha said the US did not have a Federal Reserve till 1920s even though serious liquidity crisis arose in 1907 and repeated thereafter.
At that time, a group of senior bankers became the liquidity providers, but questions arose about conflict of interest as the same bankers gained substantially on their investments, he noted.
The lecture was organised by industry body Assocham.