Sinha wants pension money in equities

Says curbs against workers’ interests; also promises simplification of investing rules, more nabbing of manipulators.

The curbs on pension funds’ investment in the capital market should be relaxed, says the chairman of the Securities and Exchange Board of India, U K Sinha.

“The lack of pension money coming into the market is an issue,” said Sinha. “India is perhaps the only significant country where there is a prohibition that workers’ money cannot be invested in the market. I have not seen any other market where workers’ money is prohibited by regulation,” he said, while speaking at the Skoch Summit here.

Sinha, who assumed the role of Sebi chief in February, said there was also a “policy advantage” in allowing pension money in the equity markets. “We will be creating a counter-balance to foreign institutional investor (FII) money in the market,” he said.

According to the current norms, pension funds are allowed to invest up to only 15 per cent of its corpus in equity markets. However, trustees of the pension funds have traditionally been wary of stock market investment, as a sudden fall in the market could wipe off a significant chunk of pensioners’ money.

The Sebi chairman, however, is of the view that the money should not be prohibited by law and that workers should be given a choice. “If a worker is against investing in the market, it is perfectly fine, but why should regulations prohibit it?” questioned Sinha. My argument is also because pension money is long-term money, he added.

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On a different note, the Sebi chief sent a strong warning to those guilty of malpractices in the stock market. He said the regulatory body was working on strengthening its surveillance measures and that its “capabilities in the next six months would be one of the best in the world”.

“I would like to communicate this message that we would be watching the movements or the irregularities very closely. We have already implemented certain phases,” he said. “Compared with a year ago, we are getting much more alerts and we are catching up, telling people, look, you cannot get away.”

He had there were instances in the past when people got away because the system could not catch up.

Sebi has often been criticised for the cumbersome processes involved in basic investing activities, such as opening a demat account and applying in a primary issue. Sinha said they were trying to address these. “Sebi is working on removing bottlenecks and irritants. It is a tough task to invest in the market or redeem,” he said.

He said they were working on technology for mutual funds that would allow investors to get consolidated accounts and statements.

Sebi was also working on simplifying Inital Public Offer documents, that currently run into hundreds of pages. “In the primary market, disclosure is too voluminous and too unstructured. If you want to participate in an IPO, you do not get any meaningful information unless you go through 200 pages of fine print,” noted Sinha.