Capital market developments in the past few years have to be viewed in this context. If investigating the second major stock market scam was the biggest expectation from Sebi in the past three years, then its record has been rather miserable. It has the scandalous distinction of losing a case against a large brokerage firm only because it failed to issue its final orders in time. While it has indeed issued fairly stringent orders against Ketan Parekh and his companies, as well as Dinesh Dalmia and DSQ Software, many of their cronies have been let off due to careless investigation or oversight. There is also no sign that Sebi bothered to follow up the joint parliamentary committee recommendation to investigate the role of promoters/corporate bodies in the price manipulation of their scrips. Having got away unscathed, they continue to be treated as honourable corporate citizens, despite clear evidence of their nexus with Ketan Parekhs manipulation and the fact that they still owe large chunks of money to banks and institutions. One of these scrips was brazenly manipulated again in January 2005 and its price had to hit the upper circuit filter for eight consecutive days before it attracted the regulators attention. Whether it is insider trading, market manipulation, or even the high profile case against mutual fund manager Samir Arora, Sebis record has ranged from patchy to pathetic. Although the Securities Appellate Tribunals (SAT) curious decisions are responsible for overturning several Sebi actions, Sebis own orders have often been ill-conceived, arbitrary and unable to stand the test of judicial scrutiny.
In the realm of market development, Sebi had focussed its attention on three broad issues. In the secondary market, it wanted to push for a T+1 trading system to put India on par with the best in the world. But as Sebi officials themselves admit, this fanciful goal had little support among market intermediaries or investors, because it would increase the pressure on broker back-offices beyond their capacity. A constant question asked of Sebi was, what is the big advantage in settling trades within a day and who is expected to benefit from the move There was no answer. In fact, Sebi sources admit the T+2 system worked only at the exchange level and not the investor level. It also worked for institutions, but not for retail investors. Although brokers made their pay-in on the appointed day, they werent able to collect funds from investor clients as efficiently; this increased their costs, as they ended by funding clients.
Be it insider trading or market manipulation, Sebis record is patchy
Sebi tried, in vain, to set up the Central Listing Authority