The government is looking at ways to expand SEBI’s powers instead of revamping it
In the UK, an entire regulatory super-structure, achieved by merging several regulators was scrapped in 10 years flat. On the other hand, look at India. We have 23 stock exchanges which will not shut down because of tax issues and red tape, nor grow into national-level competitors because SEBI has deliberately created innumerable roadblocks to growth or capital-raising through listing. Instead, their life is prolonged by converting them into being brokers of the two big national bourses while their members act as sub-brokers. In this structure, management is unclear and supervision is weak. In over 20 years since SEBI got its financial teeth, it hasn’t found a way to close these bourses which have little chance of independent survival. Forget older regional exchanges, SEBI doesn’t even have the will to close the OTC Exchange of India or the Interconnected Stock Exchange (launched in 1999) that stays alive through its brokerage subsidiary (ISE Securities & Services), which is a trading member of the National Stock Exchange (NSE). Surely, this new experiment could have been shut down without agonising about vested interests and political interference?
But no. The growth in SEBI's authority and influence is due to its ability to collect fees and fines by expanding its turf and creating new institutions (the National Institute of Securities Management is one) rather than shutting them down. While its attempt to encroach on the IRDA’s turf has been scuttled, there is still talk about merging the Forward Markets Commission with SEBI. In the process, SEBI has become powerful, capricious, arrogant and bureaucratic like other enforcement and investigation agencies, but enjoys the perks of the best private-sector companies in terms of housing, foreign trips and a fat dollar-denominated daily allowance. Naturally, it is one of the most coveted postings for officials from all government agencies. Bureaucrats especially covet the posts of SEBI chairman and whole-time members. Is it any wonder that instead of restructuring the market watchdog to keep it sharp and alert, the entire government machinery works at finding ways to expand its powers? — Sucheta Dalal