New Delhi: Aweek before he relinquishes charge as chairman of the Securities and Exchange Board of India (Sebi), C.B. Bhave spoke to the Hindustan Times about his three controversy-laden years. As always, Bhave took questions with a calm but firm demeanour, in his last interview as the capital markets regulator. Edited excerpts:
How have the last three years been for you?
Very interesting. I had moved out of the government space in 1996, though I was still in the public service area. Coming back to Sebi was particularly interesting. I had worked for Sebi between 1992 and 1996 when it was in its formative stage.
Clearing the air: Bhave said he has no regrets about his tenure. Ashesh Shah/Mint
Do you see a shift in the way Sebi used to be when it was created and is today, in terms of the complexities of the market, the demands on regulators, the increased intellectual requirements, the technology, surveillance demands that have grown?
There was a big difference. One arose out of the fact that the use of technology in capital markets has intensified. It was virtually absent in the ’92-’96 period. It was also the time of NSE (National Stock Exchange) becoming a significant player and BSE (Bombay Stock Exchange) computerizing…it had just started. By the time I came here again, not only did we have computerized exchanges, we had dematerialization completed. We also had new products come in the market. Like derivatives didn’t exist in 1996. The mergers and acquisition activity had also increased.
What sort of demands did these changes put on you personally? Did you have to play catch-up with the market?
I did have to get briefed about the latest in some areas about which I was fairly familiar, while in some areas where I was not familiar, I needed to be briefed more.
The stocks of Anil Ambani companies have fallen and he has complained to you. What do you plan to do?
As you can see I’m in Delhi. But whenever we receive such complaints, we do investigate and see whether there is any pattern, whether there is anything that’s violative of any rules and norms. And if we don’t find anything, we say, “It’s market forces. It was just a suspicion.”
There are accusations that you are helping NSE over MCX (Multi Commodity Exchange of India Ltd). They have been raising issues in public that you are not allowing them to start their exchange.
Actually, if you see the history of what happened, at some stage while the MCX application was under consideration of Sebi, they went to the high court. And the Bombay high court directed Sebi to pass an order in a certain period of time. And that order has been passed by Sebi. Once Sebi has passed an order, we don’t comment on the issue at all. The order is in the public domain, everybody can see the reasons why we are doing what we are doing. And the orders are subject to judicial scrutiny. So they can be challenged in SAT (Securities Appellate Tribunal) or Supreme Court.
At some stage it can happen that the aggrieved entity crosses the line and says things that should not be said. I feel that as regulators we must observe restraint and not indulge in charges and countercharges because whatever we had to say on that issue has already been said in the order.
This is part of a larger macro regulatory environment, where many companies under pressure from regulators or environment concerns are going public with their angst. What is happening?
I would make a small distinction between others and Sebi. After a quasi-judicial order is passed, the correct course of action will be to challenge that order. Making accusations in the media is not on. If someone decides to do it, it is for them to decide the standard of their behaviour. It is certainly not in Sebi’s book to respond to such things.
Two days ago you recommended to the ministry of corporate affairs (MCA) that it should disallow interested shareholders from voting on special resolutions in related party transactions, following the Satyam scam. How do you see this playing out practically, given that independent directors are often not quite independent?
Actually, as far as the directors are concerned the position is clear. A director who is interested must stay away from the discussion as well as voting. What the Sebi board resolved two days ago was that when the matter goes to the AGM (annual general meeting), for shareholders to vote, then if some shareholders are related parties in the transaction, they should stay away from voting. And that part is not covered in the proposed amendments to the Companies Bill. Ultimately, MCA has to take the call in the matter. We have looked at other jurisdictions in the world to see whether elsewhere this exists or not. It does exist. We will supply this information to MCA.
This ties in well with your reputation of treading in cross-jurisdictional issues! First was Irda (Insurance Regulatory and Development Authority) and now this. Of course, this is a suggestion, not a regulation. On hindsight, how do you think your fight with Irda over Ulips (Unit Linked Insurance Plans) played out? Do you agree, as many believe, that Sebi was slapped aside?
People are entitled to their views. But this was no fight with Irda. We believed that Ulip as a product had two components—investment and insurance. We believed that the investment component squarely came under Sebi’s purview. So, we issued some show-cause notices to insurers that were offering these products.
After that, there was a prolonged period of time during which there were discussions between Sebi, Irda and the government. And at no point of time was an indication given to Sebi that it is the government’s preference that Irda should regulate this and that government would be amending the necessary legislation. We had given the government adequate notice that we, having given show-cause notices, will have to bring the matter to a conclusion, which we did. What happened subsequently is in the public domain. If the law is changed to say that Ulip regulation should be under Irda, so be it. Equally if the investors have benefited, then it was just as well that the issue was raised.
As you end your tenure, what is the one thing you’re proud of?
It’s difficult to judge oneself. I have always been proud of that fact that I have given 100% to my job.
Any unfinished agenda?
There will always be things to do. There will be things that are in the pipeline, things that need to be thought through, some new things to be done.