Sucheta Dalal :Deja vu?
Sucheta Dalal

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Deja vu?  

Apr 18, 2005


When the Sensex tanked by 219 points last Friday some investors began to see the spectre of another May 17. That naturally drew attention to the Securities and Exchange Board of India’s (Sebi) investigation into the events of May 17, 2004, and the 12 show causes notices it has issued to intermediaries. The regulator has taken the stand that it will not reveal names until action is initiated. That is all very well, but the notices suggest that it has prima facie evidence of wrongdoing or market manipulation. In which case, shouldn’t the regulator issue at least a generic warning to the market about the nature of its findings and the possible consequences? Such a warning could help investors avoid a repeat of Manic Monday. But by failing to release its findings, isn’t the market watchdog preventing investors and intermediaries such as banks and mutual funds from taking steps to avoid being caught in a similar crossfire? Maybe the finance ministry should ask some questions.




The Joint Parliamentary Committee’s (JPC) report into the stock market scam of 2000 had several adverse comments about the functioning of the finance ministry, Reserve Bank of India, Department of Company Affairs, Sebi and several stock exchanges. But the report fought shy of pinning responsibility on individuals. At best, it wanted further investigation into specifically named companies, brokers, banks and regulators. In the years since the report was released, the government has apparently produced three Action Taken Reports (ATRs), but only the first was available to the media. The other two have apparently been submitted to Parliament but are never heard of. The JPC report itself was posted on the         Parliament website in a show of transparency; but for more than a year now, the NIC, which operates all government websites, hasn’t noticed that links to specific chapters do not open. The ATRs have never been posted on the Net. As for the firms, banks, brokers and institutions named in the report, there is very little action and almost no further investigation. Does this mean that the JPC report was released and promptly forgotten? Not quite.


Just one stone


Paragraph 9.31 of the JPC report has three recommendations pertaining to Sebi. Of these, the first says that ‘‘the role of Executive Directors (ED) in charge of the Secondary Market division and the Surveillance Division’’ needed to be ‘‘critically looked into for not ensuring compliance with various actions recommended in the inspection report’’ of the Calcutta Stock Exchange for 1999 and 2000. This means that two senior officials ought to have faced disciplinary action. The problem is that the JPC’s demand itself is ill-conceived. Firstly, the surveillance department had nothing to do with annual inspections of exchanges; those were handled by the secondary market division. Here too, the responsibility was divided between two EDs, of which the one responsible for the specific inspection has long retired. How is this relevant today when the JPC report itself has been forgotten? Well, because the careers of two Sebi EDs are constantly sabotaged by this single sentence in the JPC report. Every time they are in the running for a promotion, their rivals raise the bogey of ‘‘JPC strictures’’ to knock them out of the race. Those in charge of making decisions are also happy to listen to innuendo rather than read the report correctly. If that were not enough, a new Sebi appointee is busy digging up past regulatory decisions and passing them on the Central Vigilance Commission for action. This is the same Sebi whose record of supervision has been so abysmal in the last three years that almost anyone indicted by it has got away in appeal because of its shoddy investigation.


Busy tone


MTNL seems prone to making premature claims and advertising products and services that it is in no position to deliver. In early March, it made a splash with an offer of affordable Triband services. Those who eagerly registered for the service are still waiting for it to roll out with no idea when that will happen. Immediately afterwards, there was another advertisement offering a series of add-on services such as call transfer at no extra cost. Again, those who called were promptly given a ‘registration number’, but a month later there is no sign of the services being operationalised. MTNL’s mobile service (Dolphin) is seeking permission from strategically located buildings to house their cell sites. Some of these apartments are being approached by touts offering to negotiate a higher rental from MTNL in return for a hefty pay-off. MTNL clearly needs to get its house in order.


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-- Sucheta Dalal