SEBI for greater transparency over market entities, promoters

In its last major decisions under CB Bhave's leadership, SEBI today tightened the noose around erring market players, promoters and investors, while streamlining the public offer bidding process and grant of licences.
    
But a decision was elusive at a SEBI board meeting on revising rules for company takeovers as also for new regulations for the way stock exchanges are owned and did business.
    
The regulator decided to bring in a greater oversight on brokers, mutual funds, bankers and other market entities by limiting their initial licence to five years and said it would be renewed into a permanent one based on their track record.   

The move would also save the market intermediaries the pain of seeking renewals every year.
    
The decisions were taken at the SEBI board meeting under chairmanship of Bhave, whose term ends on February 17. He would be succeeded by UK Sinha, head of fund house UTI AMC and chairman of mutual fund industry body Amfi.
    
SEBI also decided to suggest to the government to put in place checks to avoid incidents like Satyam scandal being repeated.
    
In this regard, SEBI said that it would suggest the Ministry of Corporate Affairs to put in place a clause in the new Companies Bill to bar any investors, including promoters, from voting on any matters where they have an interest.
   
In Satyam case, the board members, including the nominees of promoters, had decided to acquire two companies — Maytas Infra and Maytas Properties — promoted by the family members of Raju family, the promoters of the IT firm.
   
Taking a cue from the Satyam case, it was decided that a suggestion would be made to MCA that for passing resolutions where one of the investor has conflict of interest, the interested investor should not be allowed to vote, Bhave said.
   
In another decision, Sebi made it less expensive for investors to buy shares in public offers and also rights issues, where shares are sold to existing shareholders.    

Sebi decided to make it mandatory for non-retail investors to bid through ASBA — a facility under which the money gets debited from investors' account only after share allotment.     

The ASBA (Application Supported by Blocked Amounts) facility shall be mandatory for non-retail investors making applications in public/rights issues with effect from May 1, 2011," Bhave said.
    
The move to grant licences initially for five years is said to have been aimed to keep brokers, mutual funds, bankers, portfolio managers, depository participants and other market intermediaries under check for any possible wrongdoings.

The Sebi board also decided that the currency derivative
segment would have self-clearing members and they would be
required to have networth of  Rs5 crore.
 
The two proposals — one on the new takeover code and the second on governance and ownership of stock exchanges and
other market infrastructure institutions — were aimed at bringing in sweeping changes in the way the takeovers are conducted and the bourses are owned, respectively.
    
Bhave said that the government was still in consultations on the new takeover code and SEBI would take a decision once it hears the final word from the Centre on this issue.
    
But, the regulator sought more time for new norms for
takeover of companies, as also for ownership and governance
issues of stock exchanges, clearing corporations and
depositories.
    
While the SEBI is awaiting some more clarity from the government on the Takeover Code, the regulator was collating the feedback received on Jalan panel recommendations.
    
The takeover code has been awaiting a clearance for many months now and has been discussed in at least three meetings of the Sebi board, which has representations from the government also, so far without any final decision.

While Bhave did not specify any reasons for delay in decisions on these two major issues, sources close to the development said that the government is of the view that these matters could be best taken up by the next SEBI chief.     

Asked about the end of his tenure, the outgoing SEBI chief said it was the institution that was supreme and not the person heading it.
    
"SEBI is in an institution. Chairmen come and go, but SEBI remains there," Bhave said, adding that he enjoyed his tenure.
   
"It's been pleasure intreracting with you people (as SEBI Chairman)," he said, but refused to take any further personal questions.
     
Bhave took charge as Sebi chairman on February 18, 2008
on a three-year term.
     
His tenure as the most powerful person in the capital
market was marked with many significant developments,
including some steps lauded as highly pro-investor, as also
some decisions that angered a host of entities including
insurance regulator Irda and corporate houses like Sahara and
FTIL-MCX group.