Kick-Starting Sebi

Perhaps Sebi has got into the act of reviving the primary stock markets at the insistence of the finance ministry. While there can be no denying that drastic steps have to be taken to kickstart the markets, the essential question is: who should be doing it and how? Clearly, tampering with a corporate's choice in raising money "" either by dictating the markets or by specifying the choice of instruments "" is out of the question. As regards sops, direct inducements fall into the exclusive purview of the finance ministry. The market regulator should studiously refrain from playing the markets. In fact, it is reported that after the earlier cavalier dismissal of the stock markets as an indicator of the economy's health, the finance ministry is considering a review of minimum alternate tax, double taxation of dividend and the limits under Section 80L of the Income Tax Act.

Sebi's job begins and ends with maintaining order in the markets so that the investor has reasonable assurance that he will not be skinned by some unscrupulous operator. It must realise that the depressed primary markets are partly a reflection of a crisis of confidence in market operators. To that extent, it also reflects lack of confidence in Sebi itself. The regulator has taken some steps towards ensuring a minimum shareholding pattern which should make it difficult to rig prices at will. But as its running battle with underwriters in the Pittie issue shows, its grip is far from firm. The activities of share and transfer agents, of merchant bankers, and of brokers operating in cartels have been well documented and so has been Sebi's distinct inability to rein them in. It would be more in order that Sebi focuses on tightening the regulatory regimen so that investors have confidence in the marketplace. Without that, even tax sops may not work.