India’s market regulator has flagged the need for banks to step up safeguards around price-sensitive information, Securities and Exchange Board of India (Sebi) chairperson Tuhin Kanta Pandey said.
The regulator has held multiple workshops with banks to strengthen internal controls and limit access to sensitive data, following its order alleging an insider trading scheme involving a Central Electricity Regulatory Commission (CERC) official and trades in Indian Energy Exchange Ltd (IEX) shares. Edited excerpts from an interview with Mint:
Looking ahead to this year, what would be the top priorities for the regulator and the markets you oversee?
The circumstances are not very different from what they were the year before because I think there is a continued level of instability in the world. Growth prospects are also uneven worldwide. We can be relatively more certain about India from several things, because I think we have certain headwinds from abroad, but we have held the headwinds reasonably well in the last year.
You have the maximum 50% tariff levied. Hopefully, things can only get better from here. But then there could be further risks arising from certain other developments in the Middle East.
You will complete a year in office in March. What, according to you, in market regulation was complex or a bit challenging?
I can only say that there is always a lot of scope for making things non-ambiguous, clearer, and simpler. I think we need to really think about the next 20 years, how we are going to see our capital markets and enable it and to that extent we will look at, actually not incremental but, very substantial increases (in the capital markets).
If you are looking at very substantial increases, our enablement has to be of a much larger kind than what we are hitherto used to. We have to constantly up our game and look at which newer surveillance methods we need to deploy.
So in that case, should we remain only a very neutral kind of regulator—something comes, okay, we’ll do that, we’ll look at market risks… because [after all] we do have a market development role and an investor protection role.
The rules will be important for them (investors), but so will their awareness, because you can write rules, but how do we really ensure that they are going in the right direction—that they have better financial education and investment education—which is a very difficult thing to do and also to measure.
A recent report said Sebi is investigating insider trading in Yes Bank shares before its 2022 stock offering. You had also spoken about insider trading in banks in one of your speeches. Is that something that you are coming across quite often?
I do not like to comment on this because I do not know whether it is true, not true or what are the final findings. There is a show cause, apparently. But then, people have to satisfy the concerned adjudicating officer that nothing has gone amiss in this.
We did a little bit of a preventive job there in terms of really saying that how banks as fiduciaries, they hold information, not necessarily for their own stocks, they hold information sometimes from the other companies where if there is price sensitive information, they should guard and they should sufficiently bring systems inside to decide who should have access to information.
Access to information should not be readily available where there is a possibility of a leak. So, we had several workshops with banks.
In Delhi, we had a very big meeting where we called all the regulators and told them as well, because everyone, in many respects, controls where the data goes, and they are also doing some policy, particularly in the context of what happened at the CERC.
There has been a rise in the number of influencers or people who talk about the stock market, who sometimes cross the boundary on social media. Moving forward, will that be an area of focus for you?
I think this is going to be a very major area for us. Trust is what makes a market grow, and trust means that people should be able to say that our voices are being heard, that action is taken on our suggestions, that someone is actually paying attention to our concerns- but that we also have to take the risk ourselves and understand that risk.
We really have to think about how much more work we need to add. I would say that we will be a growing organization and we will be rapidly growing, consistent with the needs of our capital markets. Corporate governance is an area where we need much more capacity-building.