Monday, August 20, 2012

SEBI does surprise one in its attempts to improve

For an agency that has been criticised, flogged, and even summarily dismissed as being non-efficient, SEBI does surprise one in its attempts to improve. Question is, for whom? by Deepak Ranjan Patra

This Section, amended recently, is the most powerful part of the SEBI Act which gives expansive powers to ban any player from the market – and in a landmark February 2010 judgement, the Supreme Court quashed all opposition to the implementation of this Section of the Act, commenting that SEBI could now implement the amended part of the Act with retrospective effect.

Another area where the market regulator needs to enhance its muscles was sited clearly by a Joint Parliamentary Committee in 2002 itself. The report pointed out that the regulator never ensured compliance of its recommendations within a timeframe. Even today, things have not changed much. SEBI’s annual report for FY ‘08-09 suggests that the number of pending enforcement actions have surged 51% from 3,656 as on March 31, 2008 to 5,521 on March 31, 2009. SEBI claims it has a 94.34% grievance redressal rate – which is commendable – but if it fails to enforce the actions, then it might just end up as yet another toothless watchdog, despite the Supreme Court ruling.

And finally, SEBI – if it truly wishes to be termed a regulator and not a collaborator – needs to make its so-called investor protection agenda fanatically active. Consider this: to help investors in providing them a fair idea about the risk involved when a company comes up with an IPO, SEBI made IPO grading mandatory from May 1, 2007. But did it solve any real purpose? Sadly, no! As reports suggested early this year, IPOs that came after introduction of the norm faced substantial wealth erosion (in the range of 20-70%) irrespective of their grading. That is only one example of where investors on any day prefer depending on private wealth advisors than SEBI. Will SEBI’s almost non-existent retail education agenda ever change? Well, when was the last time you heard of SEBI conducting a workshop to educate retail investors on the vagaries of the stock market and the need for them to actually stay away from the same? As for us, we’ll await the day when a SEBI warning notice to a company is a pre-cursor to an impending arrest...





Posted by at
Labels: , , , , , , , , , , , ,