Backlog of cases down in Ajay Tyagi’s first year as Sebi chairman
Mumbai: In the year since Ajay Tyagi took charge of the Securities and Exchange Board of India (Sebi) as chairman, the 59-year-old bureaucrat from Uttar Pradesh has been trying to clear the massive backlog of cases at the market regulator.
When Tyagi came on board on 1 March last year, Sebi was saddled with a many as 7,000 pending cases. After spending a few weeks taking stock, he focussed his attention on the Enforcement Department, which deals with levying penalties and strictures for market infractions.
An analysis of orders published on the regulator’s website shows that in the past one year, Sebi has reduced the case backlog by almost 10%. Rulings came fast on some major cases that had been pending for more than five years—such as the one in the nine-year-old a case involving energy giant Reliance Industries Ltd (RIL). Sebi banned RIL from accessing the equity derivatives market for a year and directed it to disgorge the profits made by violating rules when it sold a stake in its erstwhile unit Reliance Petroleum Ltd (RPL).
Another big one was the barring of firms in the Price Waterhouse network (PW firms) from auditing listed companies due to their role in the Satyam Computers Services Ltd scam after eight years.
“His appreciation of the impartial but quick resolution of enforcement cases. He has not only shown integrity but also spine,” said Sandeep Parekh, managing partner, Finsec Law Advisors.
Tyagi also became the first Sebi chairman to discern the role social media plays in market manipulation, moving swiftly on a scam where earnings and key financials of Nifty 50 companies found their way to WhatsApp groups before they were made public. Sebi has asked companies such as HDFC Bank and Axis Bank to conduct an internal inquiry on the leakage of information and conducted searches on 24 brokers and traders in the context.
Tyagi and a Sebi spokesperson did respond to requests for comment.
One controversial issue in Tyagi’s record has been Sebi’s order on so-called “shell companies” based on a directive from the ministry of corporate affairs (MCA). Sebi placed trading restrictions on 331 companies based on an MCA letter which was criticized for not being well thought out. The regulator has in the majority of the cases lifted restrictions and referred more than 25 of them for a forensic audit to the exchanges.
The commodities market was the next big issue on Tyagi’s agenda. The entire market opened up and commodity options saw the light of the day. In August, Sebi allowed MCX to launch options trading in gold, a long-standing demand of the industry. It also allowed universal licences for brokers, bank sponsored brokerages to deal in commodity futures and universal exchanges to trade both commodity and equity.
“Sebi has pretty much announced the big bang reforms needed for commodity markets barring a few niggles. Now it is up to the industry to use these measures to bring liquidity in the market,” said a senior official at a national exchange, who did not wish to be named.
Mutual fund regulations have been another area high on Tyagi’s agenda. During a market press conference in December last year he said, “We should clean up, improve standards when the going is good”. While clearing pending issues was on top of his agenda, Tyagi also decided to take a relook at all the regulations for ease of doing business. However, progress has been slow on this account.
“He has not yet got a firm handle on the developmental side of regulation i.e. reducing entry barriers where they are unnecessary or minimising unnecessary regulatory costs in the system arising out of complexity,” said Parekh.
At this point, Sebi is relooking at no less than seven key areas for a revamp starting from corporate governance, governance at exchanges, insider trading, listing regulations and disclosure requirement to name a few.
“In the current environment, the most awaited and most anticipated move will be the amendment to listing regulations relating to disclosure by listed entities of defaults on payment of interest/repayment of principal amount on loans from banks/financial institutions,” said Yogesh Chande, partner, Shardul Amarchand Mangaldas, a law firm.
Another issue that came up for criticism in Tyagi’s otherwise well appreciated year as Sebi chief is the withdrawal of the loan default circular just a day before it was to be implemented. But this anomaly is likely to be corrected in the wake of bank frauds, where the finance ministry is keenly looking at the proposal.
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