The synoptic account of C B Bhave in “Everyone’s favourite whipping boy” (September 14) underlines the challenge of reviewing the performance of a regulator. It is all the more more intricate in the case of the Securities and Exchange Board of India (Sebi) since it has the responsibility “to promote the development of, and to regulate, the securities market” (Preamble of Sebi Act, 1992). Both these objectives are not always in harmony. Excessive regulation hinders market development and lack of regulation jeopardises the market in the medium to long run. A regulator should, therefore, be able to do a fine balancing act. How does Mr Bhave fare in terms of the balancing act? His bizarre attempt to protect investors brought more harm than good.
Scrapping entry loads in the mutual fund industry is a case in point. In the absence of a robust financial infrastructure and financial literacy, mutual fund agents were bridging an important last-mile gap. They were educating the public on the virtues of financial savings, planning and the markets. At one stroke, Bhave brought the market to near-collapse. Out of redemptions worth more than Rs 14,450 crore in equity mutual funds in the past 13 months, 1.044 million investor accounts vanished in this category. It neither benefited investors nor helped in the development of the market. Such a reckless act solicits public condemnation. It would have been more prudent to rationalise the load structure and increase investor awareness about mis-selling of products.
His recent initiative of allowing mutual fund products to be traded through the stock exchange platform is another example of hasty decision-making. It would certainly benefit the National Stock Exchange (NSE) at the cost of millions of mutual fund distributors. His obsession with algorithmic trading and co-location provision is nothing but an attempt to boost NSE’s bottomline, thereby putting individual/small investors at a greater risk.
Vishnu Sachdeva, New Delhi
