Christmas comes with its share of surprises. The Christmas tree is a great tradition, and so is Santa. Even as I have stories about both, let us keep the tree for another day. Growing up among Christian families and having gone to a school run by Christians, I learnt to love Santa. I even considered converting, greedy for gifts the old man doled out every December.
But, in the late 1990s, Arnold Schwarzenegger’s Jingle All The Way hit the theatres. The former California governor played a dad who desperately tries to get a hot-selling ‘Turboman ‘toy for his son for Christmas. It was then that I realised that often it’s the parents which played Santa and left gifts by their children’s bedside. Santa was never the same again.
The Street’s own ‘Jingle All the Way’ moment came two weeks ago. Some secret Santas had their masks pulled off in distant London court rooms, bringing the focus back on participatory notes (P-notes), widely used by entities who do not want to reveal their identity for investing in Indian stocks.
Quoting unnamed sources, a Financial Times report on Friday said “as many as 25 Indian businessmen” had used illegal structures to bring money back into the Indian stock markets.
A private wealth manager told me how all this was making people suspicious about every stock rising. It is very difficult to tell cheese from chalk with the information available in the public domain. Investors are worried about stocks with obscure foreign names holding big chunks. FII holding in a stock is no longer an unqualified boon.
In this mayhem, where allegations and rebuttals fill the air, the first victim is trust. Unlike the Sensex, trust is not measurable in points, but is far more valuable. It is the foundation on which any market is built. “Trust comes by foot, but leaves by horse” is a Dutch proverb I recently learnt. The UK’s Financial Services Authority (FSA) seems to have booked a flight ticket for trust to leave the Indian markets.
U K Sinha, who heads the Securities and Exchange Board of India (Sebi), FSA’s Indian counterpart, is one of the few men who can cancel that flight. On Friday, Moneycontrol quoted Sinha as saying in Bangalore, “There is a belief or suspicion that a lot of Indian money might be coming through that (P-note) route. I would like to clarify that a very strong KYC (Know your customer) is done whenever any participatory note is issued.”
To be fair, Sebi has tightened the reporting norms for FIIs and has given diktats to structures such as protected cell companies to improve disclosures or wind up. But, often it’s a catch-up game. Even on being caught, offenders have often managed to escape conviction in courts.
Sinha has asked for advanced electronic surveillance tools to catch offenders and nail them in courts. It is in the interest of the market and the trust it must not lose that Sinha is granted his New Year wish.