 "Rajeev Agarwal")
The term of Rajeev Agarwal as wholetime member of the Securities and Exchange Board of India ended on Wednesday. In his five years, he handled various key departments at the markets watchdog. Edited excerpts of an interview with Shrimi Choudhary:
What were the most important areas and issues handled by you?
I had the opportunity to work in most of the areas at different points of time in these five years. Working on IPO (initial public offer) reforms and revival of the mutual fund sector in 2012 was most satisfying. Creation of a platform (OFS) by Sebi greatly facilitated the disinvestment of public sector units by the Government of India. So far, divestment of Rs 75,000 crore has been done through this.
Another interesting area was upgrading of the surveillance mechanism, in terms of technology and methodology. The data warehousing and business intelligence system installed at Sebi is able to throw very effective alerts by pattern recognition. That is why Sebi has been able to sharpen its enforcement actions.
Manipulators continue to use shell companies to evade taxes. Does Sebi plan to put an end to it?
Sebi is determined not to allow misuse of the exchange platform for tax evasion. It has taken very effective action in the recent past. About 200 shell companies were suspended and 1,300 entities banned from the market for taking the benefit of bogus long-term capital gain. The prima facie amounts involved were at least Rs 15,000 crore.
Has P-note tightening yielded the desired results?
The situation today is completely different from what it was 10 years ago. Sebi has come out with various regulatory measures which have made the instrument much more transparent. There are participants who want a small flavour of the Indian market and, therefore, might not be wanting to come through the FII (foreign institutional investor) route. Sebi has, however, tightened the KYC (Know Your Customer) norms of P-note holders substantially, on the suggestion of the SIT (probe team) on black money.
Has Sebi arrived at a solution on the issue of self-listing of exchanges?
Sebi regulations do not provide for self-listing. No change is contemplated.
What’s the status on unfair access at the National Stock Exchange?
On algorithm trading issues at NSE, we were mainly concerned about the systemic issues, examined by our technical advisory committee. The concerns/finding we have been communicated. On third-party audit, we have intimated the NSE board. They are mature and will be getting the audit conducted; then, we will take a call.
How active is Sebi in crackdown on corporate governance issues, particularly at large corporates?
Quite active. If cases come to the knowledge of Sebi, it acts. Whenever such have arisen, the regulator has acted.
Sebi has drawn a lot of flak over the proposal to ban unauthorised tips on social media. Will Sebi back out?
Sebi has come across several cases where texts and social media have been used to send stock tips to gullible investors. We are looking into cases where social media has been misused at a large scale. Sebi has also acted in the cases of tips sent through mass text. We are also using social media to spread awareness among investors.
What’s the latest on the National Spot Exchange (NSEL) case?
Being a spot exchange, it does not fall under our jurisdiction. However, wherever we find conduct of the intermediaries in NSEL had any bearing on our markets, we initiated action.
Are there any regulatory hurdles with GIFT City as far as derivative products are concerned?
All the regulations from our side are already in place. Wherever any clarification is sought by market participants and stakeholders, we have been providing a speedy response. Sebi’s guidelines provide a necessary carve-out for fast-tracking the entry of existing stock exchanges, clearing corporations and intermediaries.
How do you see the growth of capital markets?
They have a critical role at this stage of our economy. We have an aspiration to grow at eight per cent (yearly), invest more than a trillion dollars in infrastructure and want and want the ‘Make in India’ programme to be successful. Fulfilment will require very efficient use of domestically available capital and attracting of more and more foreign capital. The capital markets bring efficiency in capital allocation and help attract foreign capital.
We will have to substantially increase the percentage of financial savings coming to the capital market. It is presently a meagre three per cent. Expansion and deepening of the bond markets is also crucial for funding of infrastructure. To sum up, an enlarged role for our capital market is inevitable at this stage.
When could we expect the stock exchanges to launch commodity market products?
The commodity markets regulator merged with Sebi only a year ago. A merger of two regulators, specially at different stages of development, is challenging. Sebi has been busy ensuring a smooth and non-disruptive merger -- it involved upgrading of surveillance and risk management systems, regulatory changes, capacity building and smooth on-boarding of existing intermediaries. Sebi is following a cautious approach to avoid any mishap. The ultimate goal is to allow exchanges to deal in all products as soon as possible.
