Fundamental, structural changes required in way markets function

Jan 01 2013, 22:09 IST
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SummaryThe Securities and Exchange Board of India was kept busy for most part of 2012 with changes in the way shares are allotted in public issues, restrictions on price movement on the day of listing, a total revamp of the consent mechanism, more avenues for increasing public shareholding and mutual funds being incentivised for increasing penetration beyond the top cities.

The Securities and Exchange Board of India (Sebi) was kept busy for most part of 2012 with changes in the way shares are allotted in public issues, restrictions on price movement on the day of listing, a total revamp of the consent mechanism, more avenues for increasing public shareholding and mutual funds being incentivised for increasing penetration beyond the top cities. In an interview with Ashish Rukhaiyar, chairman UK Sinha says he has also tried to bring in more discipline within Sebi while making sure that fundamental and structural changes ó and not mere window dressing ó are implemented to strengthen the market. Excerpts:

What do you think have been the key achievements of Sebi in 2012?

Going by the state of the economy and of the market, we felt mere window dressing and incremental changes would not do. As such, we embarked upon some fundamental and structural changes in the way markets should function, keeping in mind the need for drawing household savings from across the length and breadth of the country into the market.

The whole IPO system underwent a major change in 2012. Electronic IPO using broker infrastructure at thousands of places, expansion of ASBA, stricter due diligence norms and code of conduct for Investment Bankers, disclosure of track record of Investment Bankers and, most importantly, introduction of rejection criteria for draft red-herring prospectus are in the rule book now. For the expansion of mutual funds to smaller cities and towns, extra incentives have been provided. Churning has been discouraged and regulations for distributors are in the pipeline. For risk mitigation in the market, rules for high frequency trading have been put in place and these rules are now being studied and even followed by other countries. Enhancement of base minimum capital for brokers, dynamic circuit filters and other similar measures are now in place to avoid any disruption in the market.

The focus of Sebi during the year has been to bring about more discipline on itself. One such example is transparent criteria for rejection of consent requests which has given a very clear cut signal to the market. We also had some important achievements in our enforcement actions some of which were successfully defended by Sebi in courts of law.

Some of the initiatives are significant. Can you elaborate?

Some of the measures taken by Sebi in 2012

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