Should the new Sebi chief be like Raghuram Rajan?

UK Sinha, chairman, Sebi, will be entering the final 6 months of his current term next week

Even as last week’s appointment of IIT, IIM, MIT- educated Raghuram Rajan to the Mint Street’s top job brought a few speculation mills to a grinding halt, another set is slowly commencing operations over the other high profile job in the financial capital. UK Sinha, the chairman of Securities and Exchange Board of India (Sebi), will be entering the final six months of his current term this week. 

This is roughly about the time files start moving in the North Block.

Recent file notings revealed in court cases suggest that the process involves asking the incumbent himself if he is willing for an extension. But, as seen on the last occasion, even such a question is not an offer for appointment and willingness alone does not ensure selection. There can be many a slip between the chair and the hip even after this.

While Sinha is eligible and can even be seen as having built up a track record meriting a two-year extension, recent history stares at us. None of the past three Sebi chiefs, GN Bajpai, M Damodaran and CB Bhave managed the elsuive extension.  Even the term extension of DR Mehta, who first got a five-year term and then a further two-year extension, was mired in controversy.

It is now public knowledge that both Damodaran and Bhave had strong cases and even backers for an extension, but were vetoed by the respective finance ministers of the day. If Sinha manages to get an extension, well and good. There will be much needed continuity in the policy direction, which is critical for investors and intermediaries. Being a chairman driven organisation, Sebi has often suffered from successive Sebi chiefs sometimes taking diagonally opposite views on critical issues, making the Street run helter-skelter. Also, precious time is wasted when the new chief comes in and takes few months to acclimatise. In an election year, when market is known for its volatility, luxury of time may not be available.

If the government feels these are trivial issues and decides to go for a fresh face, who should that be? Unlike the central bank, which has a long history of illustrious economist leaders, the market regulator has been largely dominated by civil servants, mostly from Indian Administrative Services(IAS). Bajpai, though not an IAS, also came up from within the system as he was heading the state-controlled Life Insurance Corporation of India, the country’s largest institutional investor.

What are the options? Sebi does not really need an economist. But, it needs more than a trouble-shooter generalist, which the IAS often throws up. It worked well when the regulator was in an evolutionary phase, when its broad boundaries were being set up. May be it’s time for securities lawyers and market experts to throw their hats at the ring. Even as intermediaries are legally well-advised and become more belligerent by the day adding to the complexities of a globally linked financial markets, a trained legal/market mind at top would not be a bad idea. In February, Obama picked Mary Jo White, a former federal prosecutor and securities lawyer, as the chairperson of SEC. ”From 1993 to 2002, she specialized in prosecuting complex securities and financial institution frauds and international terrorism cases,” her profile said. Should we say, “Yes, we also can”?