The Securities and Exchange Board of India (Sebi) is setting up a ‘‘world class institute for training of securities markets professionals’’ to meet the training needs of its own staff and that of the entire South-East Asian region.
Towards this end, Sebi has quietly persuaded the Maharashtra government to part with 60 acres of land at picturesque Khandala and a board of governors comprising international academic luminaries, Indian industrialists and other professionals is already in place.
But before Sebi does an Aamir Khan and says ‘Aati kya Khandala?’ one probably needs to question the very need for such a grandiose plan. Why should an under-staffed and over-worked regulator want to duplicate what can probably be done as effectively if not better in any leading management institution in India.
Also consider this. In the 1980s when Sebi was born, the then chairman sent several senior officials to attend a stock market training programme that is run by the Bombay Stock Exchange (BSE). Some Mumbai colleges are also running specialised programmes on bond, forex and derivatives in association with leading brokerage firms.
The mammoth Unit Trust of India (UTI), also a government organisation already, has the Indian Institute of Capital Markets (formerly UTI Institute of Capital Markets) at a campus outside Mumbai. It trains capital market professionals and is bravely attempting to survive as a stand-alone profit centre. Surely, this institute could be upgraded to cover any gap in quality market education that is perceived by Sebi, if at all it is the market regulator’s headache.
Additionally, India has many reputed management institutions that would be happy to design training programmes for capital market professionals with a focus on regulatory and compliance issues to meet international standards. This is how the famous New York Institute of Finance came about.
Clearly, none of these meet the international aspirations and pretensions of our market watchdog. It had to demonstrate its clout through its own training college on a sprawling campus. After all, if UTI has an institute, the BSE has one, the IDBI has a designer campus at Hyderabad and banks, insurance companies and the Reserve Bank of India have multiple facilities to provide ‘special’ training to their staff, why should Sebi be left behind and not have its own showpiece?
Well, for the simple reason that times have changed. We want the government to stick to administration and governance and not get into areas outside its core competency. Even the communists, who constantly cavil about liberalisation, would agree that taxpayers’ money should not be squandered on a show of strength expressed as more new government institutions.
Over the last decade, we have stopped government companies from baking bread and manufacturing cars and we are painstakingly trying to get it out of hotels, airlines, aluminium, steel, telecom and other areas that are well served by private enterprise. This new thinking has apparently not percolated to the Sebi’s board packed with government officials who cleared its proposal.
Sebi itself has kept its plans for the international training centre very low-key. Not even a hint of its first meeting of the board of governors was leaked to the media hoards that routinely stalk the regulator. This contrasts with Sebi’s normal transparency about its development activities. It sets up committees, releases their reports for public discussion and only then frames new regulation. The last time it kept something so secret was when it introduced MAPIN — a biometric fingerprinting and unique identification number (UIN) system for capital market intermediaries. That move caused outrage among everybody connected with the capital market and there is little evidence of the database having improved Sebi’s investigation process.
The ‘international’ training facility should cause similar irritation, especially over the issue of its funding. In the last few years, Sebi has constantly claimed a shortage of funds. It has drastically cut the grants to registered investor associations to conduct seminars and training programmes for investors citing lack of funds.
Also, Sebi has made several proposals to the Investor Education and Protection Fund (IEPF) carved out of unclaimed interest and dividend income to fund its activities. It once sought funds for holding seminars across the country. It recently sought a hefty grant to set up infrastructure for the investor Ombudsman to resolve investor grievances. Clearly, Sebi not only is short of funds, but also sees nothing wrong in grabbing investors’ money to provide its core services such as resolving investor grievances.
Now let’s take a look at Sebi’s finances. In 2003-04, it has reported a 27 per cent decline in income and fees collected from various sources (except new registrations in the derivatives segment).
Stockbrokers account more than half the registration fees collected by the regulator (at one time it was 75 per cent) and that dispute is still unresolved. Meanwhile, money from broker registration fees has dropped nearly 37 per cent to Rs 63 crore.
Meanwhile, Sebi is already committed to several large heads of expenditure. For instance, it has a huge independent building coming up in Mumbai, which will house all its various offices that are currently scattered at four different locations. It is also committed to the creation of a Central Listing Authority (CLA), although the need for this institution and the infrastructure that it will entail look more redundant everyday. Similarly, its growing staff and their accompanying accommodation needs will also require significant expenditure commitments.
In the circumstances, isn’t it pertinent for investors, market intermediaries or even the government to question why Sebi is embarking on the ego trip of setting up a government-owned training institution? And why should the Maharashtra government part with 60 acres of land for an effort that seems of little long-term significance?
It is important to remember that this is the very State that allowed the International School of Business (a joint venture with the prestigious Wharton and Kellogg business schools) to go to Hyderabad because it wouldn’t allot land without a reservation for Maharashtrians. Clearly, our priorities are all mixed up and the cost of this needless expenditure and institution building is ultimately borne by ordinary citizens. But getting empire-building government officials to see things this way, is nearly impossible.