One is not sure how much Sinha will be remembered for protecting investor interest
In his exit interview, Sebi chairman UK Sinha has stated that the regulator has been justly “harsh” with those threatening the integrity of the capital market and he doesn’t feel shy about saying that. Sinha, whose 6-year tenure as chairman of the Securities and Exchange Board of India (Sebi) will end on March 1, also said the main job of the regulator is to protect investor interest and it prioritises that over market development. Sound words those, but the tough as nails joint secretary (capital markets) didn’t necessarily do that during this term at Sebi. On the interests of investors, he has failed abysmally in two recent cases – Tata versus Mistry and Infosys. In both cases, Sebi consciously allowed the issues to linger and fester, which resulted in a massive meltdown in share prices of Tata Group companies across the board, and ditto for Infosys. With the regulator asleep at the wheel, its hands off approach allowed a massive erosion of Rs 67,975 crore in market cap across 20 listed Tata firms between October 24 when Cyrus Mistry was ousted by the Tata Sons board and December 30. Very curiously, Sebi ostensibly did not move a muscle as the ugly spat boiled over.
Even as the founders raised Cain in Infosys over severance packages, flawed acquisitions and other corporate governance and transparency issues, Sebi’s unnamed officials claimed that they were studiously watching developments, which is bureaucratese for doing nothing. Hardly a proactive regulator, wouldn't you say? When the whistleblower wrote directly to Sinha, there was some movement in the matter through leaks to media, which brought all of us to speed on dire management issues. However, no action has been forthcoming from a regulator deep in the arms of Morpheus.
Further, Sinha spoke of Sebi ensuring “uniform treatment” for everyone and also promoting competition. In his presser, the Sebi chairman felt that the regulator has worked hard on “cleansing of markets” and all potential instruments of manipulation, including defunct regional stock exchanges, have been shut down. He said: “We have also been able to delist 345 companies and more than 2,000 companies have been brought to the dissemination board. So, the idea is that if we see that there is some entity, which could be a potential threat to the integrity of the market, we have acted very hard on it. Twice in these six years, Intelligence Bureau reports marked directly to the then PM Manmohan Singh with a sign off from the DIB himself showed how banned rogue bull Ketan Parekh was actively involved in ramping up shares through circular trading. The comprehensive reports showed exactly what time, which shares were purchased by which front/shell company of Ketan Parekh created consternation in media, but Sebi remained unmoved.
It makes for nice reading when Sinha says, “I have read comments and I am aware that there are comments that Sebi has been very harsh in this period. Well, we have been. I don’t think we will feel shy about saying that. Wherever we have found there are aberrations, violations, we have taken action. I am sure this has given comfort not only to domestic investors... but also FPIs.” He may be primarily referring to his protracted battle with Sahara and its boss Subrata Roy where courtesy the Supreme Court, Sinha scored big. Agreed that Sebi came down like a ton of bricks on NSE very recently, ensuring that both Chitra Ramakrishnan and her advisor Subramanian Anand, appointed at an exorbitant sum of money, resigned. But pressure was built up after the public interest directors who joined the NSE board, including Ashok Chawla, former finance secretary, Naved Masood, former secretary in the ministry of corporate affairs, TV Mohandas Pai, chairman of Manipal Global Education Services, Dinesh Kanabar, former deputy CEO of KPMG in India, and Dharmishta Raval, former Sebi executive director, asked searching questions about the conduct of group operating officer Anand and Ramakrishnan. This prompted Sebi to finally use the guillotine despite in the past having received complaints about Anand's huge salary and not acting on the matter.
Similarly, in the high profile Jignesh Shah case, in late June last year, Sebi typically threw its hands up saying that despite being aware of several lapses at the National Spot Exchange (NSEL), it could not intervene in the matter as the commodity spot market didn’t come under its jurisdiction, the regulator clarified in a letter to NSEL investors. Further, the regulator specified its role and restrictions in response to complaints registered by NSEL investors on the prime minister's office (PMO) portal. Finally, under duress, somnolence gave way to action when Sebi told the Bombay High Court that it was investigating complaints against Financial Technologies and its connected entities and promoters, including founder Jignesh Shah. The complaints filed by investors of NSEL alleged several irregularities and violations of the Sebi Act and alleged breach of regulations such as (a) insider trading regulations; (b) fraudulent and unfair trade practices, (c) failure of disclosure under the takeover code, and other issues. In an order posted on its website, the Bombay High Court said, “The learned counsel for Sebi submits that the Sebi has taken cognizance of the complaints filed by the petitioners and they will investigate the same.” The petitioners had sought to direct the Sebi to hear and decide the complaints on merits and in accordance with law and also within a time-bound schedule.
Sinha hankered for more powers during his tenure and he got them, some even draconian, but one is not sure how much he will be remembered for protecting investor interest.