The 1975-batch IAS officer of the Maharashtra cadre was the executive director in charge of the secondary and later the primary markets between 1992 and 1996.

That was the time when the Securities and Exchange Board of India (Sebi) was taking its initial steps to reform the stock exchanges and putting in place systems that help in investor protection. The Bombay Stock Exchange was then known as a brokers' club and Bhave was on the board of the exchange in his capacity as a representative of Sebi.

Bhave maintained that the capital market regulator's primary job is to protect individual investors and simultaneously develop systems that take care of the interests of issuers — companies and intermediaries. He also ensured that the new National Stock Exchange's surveillance systems were top class.

The slimly built Bhave, who plays tennis regularly, has a self-effacing style, but is a tough administrator.

As the head of the National Securities Depository Ltd (NSDL), he revolutionised the capital market by getting market players to accept the new system of dematerialised shares and debentures.

He won buyers' support by arguing that demat would eliminate bad deliveries of shares and impressed upon the sellers that this would facilitate early settlement and early payments. Setting up of a depository that converts physical share certificates into electronic form was not at all easy.

For example, the UK has still not been able to implement it. But under Bhave, NSDL set up the depository at under Rs 100 crore, or a seventh of the original estimate, and achieved paperless trading within just three years, the fastest in the world.

All this experience will come in handy when Bhave takes over as the sixth chairman of Sebi. For, the challenges are many as the investment climate is much more dynamic now than when he was the executive director.

He is also coming in at a time when the market sentiment is not favourable for small investors and many of them have had huge losses in some of the recent high profile IPOs.

Also, the Indian capital market has seen the entry of thousands of new investors into the system. Private equity players are getting stronger and more influential in the market and there is a demand to regulate them. This is an international issue and the Indian market regulator will have to face it, too.

There is a need to reform the primary market to speed up the processes as well. The price discovery mechanism, for example, is not efficient even in book-building as institutional investors are paying just 10 per cent and putting bids for 10 times of the amount they pay in IPOs.

Short selling and physical settlement in derivatives are the other issues that need to be looked into. The allotment and listing also need to be much faster. His predecessor M Damodaran has ensured that the homework for all these is ready and it is up to Bhave to "implement" them.

It's also an irony of sorts that Bhave, 57, is joining as the regulator. His organization, NSDL, has been fighting a bitter legal battle with Sebi since April 2006, when Sebi uncovered a massive scam involving the cornering of share allotments in IPOs for small investors.

In November 2006, Sebi ordered NSDL and a few others ‘implicated' in the IPO scam to return Rs115 crore in "illegal profits" made from IPO deals.

Of this, NSDL's share was Rs 45 crore. NSDL appealed to the Securities Appellate Tribunal (SAT), which, in December, set aside the Sebi order, describing its action as a clear "violation of the principles of natural justice."

Sebi investigation on the IPO scam isn't concluded. So as the new Sebi chairman, Bhave will have to resolve this tricky issue. As a regulator, he cannot be seen to be hurting the interest of the organization which he founded.