The NSEL scam has opened a big can of worms about the integrity of the entire regulation and supervision infrastructure, including the efficacy of the slew of independent regulators set up over the past 25 years.
After the Harshad Mehta scam of 1992, the National Stock Exchange (NSE) came into being, conceived and implemented by the late Dr RH Patil who combined sharp commercial sense with strong public spirit. The NSE, a professionally-run bourse, emerged as the best model to ensure fair and transparent trading systems. This seemed in line with global thinking that ‘professionals’ are ideally suited to run exchanges—not trading members and brokers who often take decisions that are self-serving. From there, it was a short step to thinking that high salaries for ‘professionals’ and linking their incentives to the profits earned by the bourses, would keep them focused on ensuring higher returns for shareholders, year after year. The next phase was to assume, as happened all over the world, that exchanges are commercial entities that could be promoted by entrepreneurs and made to compete.