It was never going to be easy to step into CB Bhave?s shoes; the former chairman of the Securities and Exchange Board of India (Sebi) showed it was possible to regulate and reform without succumbing to political pressures. Nonetheless, UK Sinha, who took over from Bhave exactly a year ago, hasn?t done too badly in following through with much of the clean-up that his predecessor initiated and, at the same time, coming up with regulatory changes that should help the capital markets evolve. Indeed, guidelines across segments have been tweaked or fine-tuned, whether it?s upping the PMS investment floor to R25 lakh or imposing a maximum tenure of 12 months for warrants issued along with public or rights issues. And new ones have been created for alternate investments, most of which are well thought out.
But the highlight of Sinha?s tenure so far would have to be the crackdown on a clutch of merchant bankers, private investment firms and promoters together manipulating IPOs. The Sebi chief never misses an opportunity to talk about the regulator?s strong surveillance systems and so far he?s been putting it to good use; in September last year, Sebi unearthed a racket in the GDR market pulling up several companies and foreign institutional investors for manipulating prices. In other instances, the regulator has rapped on the knuckles companies such as Pantaloon that failed to address investor grievances within the stipulated time, and Jaiprakash Associates? executive chairman Manoj Gaur, his wife Urvashi Gaur and brother Sameer Gaur for trading in the company?s shares based on unpublished price sensitive information.
Spotting frauds, tracking down culprits and then fighting them in court can be a thankless job but Sinha?s efforts so far need to be applauded. However, he should show he can net the big fish; that would be proof that Sebi means business and doesn?t want its catch to have only the minnows. Little has been heard of the Reliance Industries case: Sebi had issued a show-cause to the company in a case related to the sale of shares of Reliance Petrochemicals held by RIL, with the penalty estimated at R1,500 crore.
Sinha is, however, determined to reform the IPO space?he wants to rid day one trading of volatility or at least reduce it and also speed up time to market. He?s also trying to make life easier for small investors?the uniform KYC norms, simpler IPO forms and friendlier buyback terms are attempts in this direction. While one feels he?s able to see the big picture, it?s a fact that Sinha hasn?t been able to resuscitate the mutual fund industry. Indeed, if Bhave made a mistake, it was withdrawing the entry loads on mutual fund schemes of some 2%-plus, in one shot. The former Sebi chief might have thought he was helping small investors but in the end they missed one of the biggest rallies that saw the Sensex hit a lifetime high. Strangely, Sinha hasn?t restored entry loads, as one thought he would, given his experience at UTI. While he has allowed distributors to charge a transaction fee of R100 if the investment is for at least R10,000, that is clearly not much of an incentive.
The seasoned bureaucrat that he is, having spent years in the finance ministry, it was always clear that Sinha would be able to liaise better with the government than his predecessor, and thereby making Sebi stronger. Right now, it would appear that he has been of more help to the government; the recent norms allowing companies to auction shares through a special window look like they?re designed to help the government go ahead with its disinvestment programme. Also, the move allowing insurance companies and mutual funds to subscribe to shares of a company, even if they have sold shares in the previous six months, would help PSUs offload shares more easily.
Of course, proximity to the powers that be also has its pitfalls; a few months into his stint at Sebi, there was talk of how Sinha had had a bit of a run-in with the bosses in the ministry apparently on the selection of a new chief for UTI. Sinha could have done without the unseemly controversy, involving former whole-time member KM Abraham, who alleged he had been pressurised by the finance ministry on some crucial decisions. Incidentally, it was Abraham?s order barring MCX-SX from functioning as a full-fledged exchange that resulted in the matter being taken to court. Sebi is yet to take a call on the Bimal Jalan committee report, which had recommended, among other things, that there there be a 5% cap on the stake held by individuals in a stock exchange. What Sebi makes of the Jalan committee?s suggestion could have a bearing on the future of MCX?s proposed exchange.
shobhana.subramanian@expressindia.com
