The bouquet of measures offered by market regulator Sebi on Thursday carries the imprimatur of a pragmatic style of decision making. That it comes just days before the finance minister meets the captains of India Inc is also not a coincidence. Sebi chairman UK Sinha has given the three stakeholders in the market?the investors, the listed companies and the mutual funds?enough reasons to cheer. Of these, the decision on the takeover code broadly follows the recommendations made by the CS Achuthan committee on takeover regulations. The effect of the rise in the trigger threshold and the subsequent open offer means an acquirer will end up with at least 51% stake in the equity of the target company. This will make the acquirer the largest shareholder in the company, a highly desirable position from the point of view of corporate governance. Since RBI regulations do not allow Indian banks to finance mergers and acquisitions, heeding the panel?s recommendation for a 100% open offer would have hurt deal-making instead. While the higher threshold means more room for pure play investors, the difficulties rise for those who want to target thinly held companies. In the BSE 500, there are 237 companies where non-promoter shareholding is less than 50%. No corporate invader can now touch these companies unless Sebi decides to raise the minimum public float from the current 25%.

In the mutual fund space, the Sebi chief has begun to implement his point of view, which is that there must be some incentive for a distributor to sell a financial product. He has accepted the CB Bhave line that those incentives cannot be in the form of a commission since that would retain all the distortions like mis-selling and quick turnover of portfolios. Sinha has instead allowed a transaction charge to be reinstated in the sales of a scheme. Even e-commerce portals, like railway reservations, charge R40 per ticket for sleeper class and so the R100 charge for investments of above R10,000 is comparable. Since the average ticket size for retail investors is R50,000, this will encourage distributors in small towns to tap more people to invest, yet make it viable for them to undertake the effort. Still, it will be churlish to expect the mutual fund industry to immediately catch the wind. But read with the plan to allow a common KYC guideline for investors, these are solid steps to put competition back in the industry. But as the process varies quite substantially across each mutual fund at present, the next step for Sebi should be to make transacting on mutual fund accounts easier for investors. Sinha has raised the expectations that this too will happen soon.