The year 2011 will surely go down as one of the most eventful in the history of the capital market regulator. Along with several new regulations, however, the Securities and Exchange Board of India also saw its fair share of controversy. To begin with, Sebi saw a new man at its helm: UK Sinha took over as chairman on February 17 from CB Bhave, who had spent a three-year term with the regulator.
Among the major changes in regulation were the introduction of the new takeover code; that apart, Sebi allowed foreign individual investors to invest in mutual funds and also allowed local stock exchanges to launch derivatives with foreign indices including Dow Jones and S&P as the underlying instrument.
From a small investor?s point of view, the most important change was the introduction of uniform KYCs (know your customer norms) and the setting up of KRAs (KYC registration agencies). As for the mutual fund industry, although the regulator did not bring back entry loads for distributors, it did allow transaction charges.
Sebi also reviewed the rules on alternate investment funds and has promised to probe the volatility of IPOs on the day of listing.
Among the more important decisions that the regulator took was to issue an order barring Anil Ambani, chairman ADAG and four top executives of Reliance Infrastructure and Reliance Natural Resources (since merged with Reliance Power) from investing in listed stocks till the end of the year as part of a settlement into an investigation into the alleged use of funds borrowed overseas in the Indian stock markets. This consent order, issued in January, also prevented Reliance Infrastructure and RNRL from investing in the secondary market till December 2012, though it was free to raise funds by issuing new shares, the regulator said.
Anil Ambani, together with Satish Seth, executive vice chairman, Reliance Infrastructure, SC Gupta, JP Chalasani, directors and Lalit Jalan, whole-time director, Reliance Infrastructure, paid a settlement charge of R50 crore, ?without admitting or denying the charges?.
In July, Sinha simplified the cumbersome process of opening a trading account. He also introduced the concept of an abridged prospectus for investors and ensured that top companies disclose the results of a vote on resolutions at the AGM in order to bring about more transparency.
The new takeover code, based on the recommendations of the Achutan Committee, increased the open offer trigger limit to 25% from the existing 15% and the size of the open offer from 20% to 26%. Mutual funds, who were looking to Sebi to help them out, were not disappointed; the Sebi chief relaxed norms relating to the way fund houses could use the pool of money lying in the account which held both entry and exit loads. Later, distributors were allowed to charge new customers a fee of R150 and existing customers R100 per annum.
During the year, Sebi saw the exit of two whole-time members, MS Sahoo and KM Abraham. The latter was unfortunately involved in an unseemly controversy with the government and the Sebi chief. Abraham, who penned several important orders, including those on the MCX Stock Exchange (MCX-SX), the Sahara Group and Anil Dhirubhai Ambani Group (ADAG), alleged he had been pressured by some circles while taking decisions on certain issues. Interestingly, Abraham?s order barring MCX-SX from functioning as a full-fledged exchange, saw the latter dragging the regulator to the court. MCX?SX claimed Sebi was favouring NSE with the regulator saying that the exchange had subverted information. In November, income tax commissioner and former member of Forward Markets Commission Rajeev Kumar Agarwal was appointed whole-time member.
The capital market watchdog also revisited rules relating to anchor investors, IPOs and disclosures to be made by private equity and venture funds. Most importantly, Sebi has enhanced its surveillance capabilities.