The Securities and Exchange Board of India (Sebi) is looking at a series of measures to improve corporate governance and investor awareness in the securities market. The regulator is also keen on procedural improvements and moving to a “deterrent” enforcement regime.
Speaking at the CII Annual Session, Sebi chairman Ajay Tyagi outlined a broad range of issues that will engage the regulator’s attention over the next few months. The move comes close on the heels of the regulator’s board meet, where it took several measures including introduction of options in commodities.
On one hand, Sebi is reviewing the takeover code as well as the delisting and buyback norms- an arena where there several overlapping issues. On the other hand, it is also looking at bringing a new common stewardship code for institutional investors. Calling the absence of a common code of conduct a “worrying part”, the Sebi chairman said that since most institutions remain passive, promoters prefer to have such institutions on board. Sebi is, therefore, working with other regulators such as the IRDA and PFRDA to develop a code to address this issue.
As part of initiating procedural improvements, Sebi plans to bring downlisting timelines, launch full-scale online registration and simplify approval and fee payment processes of various intermediaries. It is also conducting regular short-term courses for its officers to help them enhance improve their skills.
Expressing dissatisfaction with the functioning of institutions run by independent directors and auditors, he said: “There are many lacunae in the concept of independent directors. The existing system is at the mercy of promoters.” Tyagi further criticised directors for not being committed to any cause.
In particular, he stressed on the need to protect interests of small shareholders, especially in companies where the combined holding of promoters and institutions crossed 80 per cent.
Referring to instances of resignation without a notice or cause, Tyagi said that independent directors have an obligation to explain the cause of resignation. Simultaneously, Tyagi also mentioned that decisions need to be taken regarding the process of removal of an independent director, especially the issue of making a special resolution mandatory for the purpose.
On auditors, the Sebi chairman was of the opinion that the system of “self-regulation” was not working and the regulator would soon discuss the matter before taking any action.
The market regulator is also reviewing a fresh draft on regulations for issuing and disclosure of capital. Explaining the “deterrent” style of enforcement, Tyagi said the regulator would focus on a few big cases that would have a “demonstrative effect”. Soon after taking over, Sebi under Tyagi had slapped a Rs 447 crore disgorgement order on Reliance Industries.
Answering reporter queries on the sidelines, he said that the process of approval of NSE’s new CEO was underway as Sebi was considering the reply submitted by the exchange. Approval for the same is likely to take more than two weeks, hinted the regulator.
He also reiterated that NSE has decided to settle unfair access and allocation-related issues before its IPO, which might take a few months.
Procedural improvements Sebi is keen on include bringing down listing timelines, going completely online for registration, approval and fee payment processes of various intermediaries.
Sebi is also nudging its officers to improve their skills and working with National Institute of Securities Markets to conduct regular short term courses.
On global issues, Tyagi said rising protectionism and deglobalisation tendencies are areas of concern and the regulator was closely watching developments here.