Sucheta Dalal :Leaking Sebi
Sucheta Dalal

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Leaking Sebi  

Apr 23, 2006



An interesting set of letters and scanned documents have been leaking into the email boxes of journalists in what seems to be a collusive effort between some disgruntled officials of the Securities and Exchange Board of India (Sebi). The target of the hate mail is a senior Sebi official who apparently evokes considerable antipathy because he enjoys the confidence of Sebi’s top brass. Other recipients of these vicious letters include the Prime Minister, Finance Minister, the Central Vigilance Commission and various politicians. On checking, we learn that Sebi itself has received a massive 65 complaints against the official in just two weeks and many of the cases that he is accused of neglecting have never even been his responsibility. The wide sweep of entities that this officer is understood to have protected is also interesting. For instance, one set of documents relates to a high-profile, high-networth investor who was served a show cause notice by the regulator in 2004. The papers indicate that for over a year, his file was passed around between various officers ranging from a trainee officer to Whole Time Member and the trail seems to end on March 21 2005 without any action. Another pertains to the Reliance public issue, where it is alleged that Sebi has permitted a Follow-on offering without bothering to investigate the allegations made by Anil Ambani when the brothers were at war. A third refers to a variety of penny stocks, which have been manipulated, allegedly in connivance with the official. The timing of this desperate campaign seems to suggest that somebody is very keen to discredit a sensitive investigation being handled by the official. However, it may also force Sebi to quickly dispose off investigations identified by the pseudonymous trouble makers.

 

Changing rules

 

One of the changes that Sebi is seeking in its amended statute is the creation of a ‘single inquiry and adjudicating authority’ that is aimed to ensure a complete separation of regulatory functions and investigation/adjudication functions within the organisation. Sebi Chairman M. Damodaran tells us that, at present, an alleged violation gets dealt at multiple levels—‘‘There are parallel proceedings under different powers by different people ending at different times often with different findings. It is not possible for Sebi to throw the findings of all these parallel proceedings separately at a person’’. In future there will be one inquiry under a middle-level officer dealing with all charges in respect of one entity. But this again would mean that an appeal against an order passed by a middle-level officer will lie directly with a three member Securities Appellate Tribunal presided over by a retired Chief Justice. Since this would cause too much of a disconnect, Sebi plans to create a three-member enforcement panel that will be headed by whole-time member and two officers of the level prescribed by its board. This panel will confirm/reject orders passed by the adjudication officer. Further, Sebi has also sought search and seizure powers to allow it to bring certain assets and documents within its control fairly quickly, but promises to use the powers very sparingly and in exceptional cases.

 

Switching roles

 

While Infosys has thrilled everyone with its 1:1 silver jubilee bonus and fat dividend, the market is still intrigued at the switch by Mohandas Pai from the role of Chief Financial Officer to Director in charge of Human Resources. Everybody knows that keeping employee costs under control and retaining the best talent is a huge challenge for Infosys. ‘‘The difference I will make will be to provide direction on strategy and on globalization which I believe I have some qualification as being the CFO’’, says Pai. According to N. Narayana Murthy, however, Pai has already been handling HR since the second quarter of last year ‘‘and has done a wonderful job’’. Murthy says, ‘‘He has brought tremendous innovation to those jobs in the short period he has been at it. Perhaps, you may not know, Mohan is a rare individual who combines both the right and the left brain capabilities. That is all there is to it’’. Another factor was that Mohandas Pai wanted to hand over the CFO’s charge to his highly capable 39-year-old successor.

 

Predicting the peak

 

As the Sensex soared up past 12,000, the biggest challenge before traders with bloated or overleveraged portfolios is to be able to forecast the peaks and troughs. When a close analysis of fundamental factors, technical patterns and Fibonacci numbers lead nowhere, it is probably time for astrology and vastushastra. Ahmedabad based G.F. Zala who appears to be a cross between a ‘jyothishi’ (astrologer) or a ‘vastushastri’ has been hard-selling his ‘‘100% success and guaranteed profit’’ predictions offering a combination of ‘‘yog sanjog, graha, gati, tithi, nakshatra, yantra, mantra, chakra’’ as well as more prosaic ‘‘formulae and per minute updates on corporate news and the stock indices’’. He apparently picks stocks and times trades through astrology. A wag says, if Zala is as good as his claim, he and his tribe may soon be asked to seek Sebi registration. The question is will they be classified as advisors, portfolio managers or stock analysts?

 

http://www.indianexpress.com/sunday/story/2993.html

 


-- Sucheta Dalal



 



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