The Securities and Exchange Board of India’s (SEBI) report on the forged letter sent to Pyramid Saimira Limited has earned well-deserved kudos for its detail and meticulousness. But look closely and its impact seems dangerously limited. The report was released on 24th April, but Pyramid Saimira, the company that was at the centre of the action, took over a month to announce that PS Saminathan will step down as chairman to be replaced by N Narayanan, another promoter-director of the company. Importantly, Mr Saminathan will remain managing director, although the SEBI report accused him of issuing several misleading statements which helped to ramp up the price to facilitate the profitable exit of the controversial promoter Nirmal Kotecha. Yet,
Mr Narayanan, the new chairman, is already on record defending
Mr Saminathan in a television interview and declaring him an innocent ‘victim of circumstances’. If that were not enough, the company has also suffered a business loss of Rs100 crore in the past year, he admits. Clearly, this is a company that is being run for the promoters and by the promoters, because its minority shareholders either have no voice or couldn’t care less.
Another worrying angle to the Pyramid Saimira case, from the perspective of investor protection, is the implication of its Private Treaty deal with Bennett Coleman & Company which publishes The Times of India and The Economic Times. A Private Treaty is a barter of discounted advertisements for the company in exchange for an equity investment by the newspaper group. But the media house has been sweetening the deal by offering branding support and positive news coverage. A senior Economic Times journalist (Rajesh Unnikrishnan) as well as an executive (Rakesh Sharma) of a PR company that has a tie-up with the Times group, have also been barred. The Times of India too has not initiated any action against the journalist, who continues to be on their payroll. This is in direct contrast to at least two previous occasions when three journalists were shown the door because of their involvement with scamsters. The first two were removed after the Ketan Parekh scam and the third was removed after being trapped accepting a bribe. If SEBI’s primary mandate is investor protection, how long will it remain a silent witness to the nexus between media and companies/market operators to manipulate news reports and mislead investors? This is an issue that ought to worry the SEBI board, but it is far too busy discrediting a board director and trashing his report on the National Securities Depository Limited in order to protect chairman CB Bhave who formerly headed the Depository.
Finally, while SEBI’s report has earned praise from the market, it has led to serious consternation in the supervision department (interestingly, this investigation was not handled by the supervision department but by the vigilance department headed by Dr Pradnya Sarvade, a former cop) which has been most ineffectual, despite access to a powerful and expensive, real-time price monitoring system. In another development, the regulator has disabled all computer ports for using pen drives in the organisation. Although many officials are angry at the implications, it does suggest that the management felt the need to plug the massive leak of sensitive information from the regulatory body.