Mumbai: Capital market regulator Securities and Exchange Board of India, or Sebi, has revamped its organizational structure by separating its investigation and adjudication wings, and assigning each to different members of its board.
Earlier, both investigation into wrongdoing and adjudication, the legal process where an arbiter reviews evidence and arguments to make a decision, were overseen by former whole-time member G. Anantharaman. But, many market participants saw a conflict of interest in this. The arrangement also potentially weakened the regulator’s adjudication ability, leading to many directives being set aside by the Securities Appellate Tribunal, or SAT, the body that hears appeals against Sebi orders.
/Content/Videos/2008-08-04/Khushboo on SEBI_MINT_TV.flv
The board has been accused of not growing its watchdog and vigilance arms in line with the market and chairman C.B. Bhave has conceded this is an issue.
While newly appointed whole-time member K.M Abraham has been put in charge of investigation, adjudication has been handed over to another full-time member, T.C. Nair. The regulator has also appointed Pradnya Sarvade, former additional commissioner of police of the Anti-Corruption Bureau, as an officer on special duty to work with its investigation wing.
An IPS officer of the 1989 batch, Sarvade is known for her integrity and has earlier held several important positions in the Maharashtra police, handling cyber crime, intellectual property rights and counterfeiting. In fact, she was the head of cyber crime cell of the Mumbai Police.
Sarvade had also worked in the Central Bureau of Investigation’s bank securities and fraud cell at Mumbai and handled the investigation and trial of the 1992 securities scam cases that had rocked the Indian stock market.
Currently, Sebi has three whole-time members of the board—M.S. Sahoo, Abraham and Nair. Abraham and Sahoo have recently replaced Anantharaman and V.K. Chopra, who completed their terms in March. Whole-time members are essentially directors of the board but not independent nominees; they are full-fledged executives, positioned just below the chairman.
At the second tier of the organization, four executive directors oversee different divisions of Sebi such as primary market, investigation, market intermediaries, corporate finance and foreign institutional investors, or FIIs.
Besides investigation, Abraham will supervise Sebi’s integrated surveillance department, its market regulation wing and international affairs. Nair is in charge of division of FIIs, custodian and collective investment schemes. Sahoo is heading the legal wing, enforcement, market intermediary regulation and derivatives department.
Internal revamp: Sebi’s C.B. Bhave. (Ashesh Shah / Mint)
Bhave, who embarked upon primary market reforms shortly after becoming Sebi chief in February, has kept the human resources and communication portfolios under himself.
While Sebi has been credited for creating an efficient market infrastructure and maintaining orderly conditions in difficult times, investigation and adjudication have not been its strength. SAT has, in recent months, set aside the regulator’s ex parte directives on several high-profile cases and, in all these cases, the tribunal has questioned the adjudicating officer’s ability to understand the subject. Ex parte refers to giving orders without giving a hearing to the party
In an April interview with Mint, Bhave said: “One needs three things so that the order becomes an appropriate quasi-judicial order. You must appreciate the evidence correctly; the interpretation of law must be sound; and finally, the order must be reasoned properly. In all these areas we need to strengthen our ability.”
The regulator has also stopped giving ex parte orders.