PM asks Sebi to root out insider trading

Promises move to strengthen Sebi's enforcement powers

Prime Minister Manmohan Singh today asked the Securities and Exchange Board of India (Sebi) to do all that it can to root out the “disease of insider trading” from stock markets. “Sebi’s future effectiveness will be its ability to finish the hard-to-define but extremely pernicious disease of insider trading,” Singh said, speaking at the regulator’s silver jubilee function here today.

The Prime Minister also said something that the regulator had been wanting to hear for a long time – that the government would do the needful to strengthen the regulator’s enforcement powers. “Our government remains committed to doing everything that is needed to strengthen Sebi so that it can deliver even more effective enforcement,” he said.

The Prime Minister favoured making it easier for foreign investors, including central banks, sovereign wealth, university and pension funds to invest in India. “Mobilisation of household savings into productive investment in the capital market must be a key goal for everyone in the financial sector. This is an area which needs priority attention, especially in view of the current macro-economic environment in our country. I would urge the Board to quickly bring to fruition the initiatives that are already underway in this regard,” he said.

He also asked that efforts be made to improve the corporate debt market. The Prime Minister said spiralling inflation coupled with a sluggish economy has dented the average Indian’s capacity to save money. He called upon the government and financial regulators to channelise domestic savings into financial assets. He said gross domestic savings, as a percentage of gross domestic product, had decreased from 36.8 per cent in 2007-08 to 30.8 per cent in 2011-12. “In times of uncertainty, doubts often arise regarding the likely return on financial assets. Individuals prefer to hold physical assets like gold and housing,” he said.

In his speech, Finance Minister P Chidambaram asked the market regulator to increase the number of people it had for policing the markets, suggesting that its current work force of 600 may be inadequate to deal with the country’s vast population and growing economy.

He urged Sebi to be a “fearless regulator” who should “bend before no one and bow before no one”.

Later, speaking at another session, Chidambaram said Indian companies seemed to prefer investing abroad than investing in India. This, according to him, is a shortsighted strategy and Indian industry should rebalance their portfolio in favour of their home country. “There are enough near-term opportunities also in India and it would be a mistake not to take part in the India growth story,” he said.

Chidambaram also called for improving the project implementation track record to encourage continuance of the flow of foreign money into India. “For every project that is completed on time, five others suffer huge time and cost over-runs. We need to reverse that if we want to ensure a decent return on investments to these foreign entities who are putting their money in the country,” he said.    

Sebi Chairman U K Sinha termed unauthorised raising of funds by various entities from the public as a critical area of concern and promised strict action against such schemes.

A postage stamp commemorating 25 years of Sebi was released by India Post.