Rumour of UK Sinha’s appointment spreads. But there are several steps in the process and only one has been taken. Remember also, that the last three chairmen were not on the “list”
UK Sinha, chairman of UTI Asset Management Company, may well go on to chair the Securities and Exchange Board of India (SEBI). His name is just one in the short-list of three that has gone to the government. So, it is not a done deal yet. There are several steps to process. And then there is always the capriciousness of the government in discarding the names on the list and putting someone completely different in the job. If so, there is something mischievous about the deliberate rumour about his appointment that was spread on the 13th December, when all that happened was that the selection committee conducted its final interviews for the post.
Those who have jumped the gun and made the announcement (apparently to the embarrassment of Mr Sinha) know the appointment procedure very well. So was there a motive to the rumour? It could only be to encourage or discourage some action by SEBI, or to signal to the existing brass that an extension for CB Bhave is not happening. In fact, it is premature to rule this out too, and we will explain why.
The process of appointing the SEBI chairman is as follows. The selection committee short-listed three candidates. UK Sinha does head that list. The names will be forwarded to the appointments committee and after its clearance (including a vigilance clearance), the finance ministry will send the names to the prime minister for his signature on the appointment. This is the crucial part, because anything can happen at this stage.
What many don’t seem to know is that names of the past three SEBI chairmen—GN Bajpai, M Damodaran and Mr Bhave—were not on the list that was finally sent to the PMO. In fact, even when DR Mehta, the chairman who preceded G N Bajpai, was given an extension, it was against the wishes of the then finance minister, P Chidambaram.
More interestingly, Mr Sinha and M Damodaran (for an extension) headed the list of names forwarded to the prime minister even the last time around and Mr Bhave’s name was not on that list. Mr Damodaran’s extension was all but finalised. But after a flurry of activity and a bizarre experiment at ring-fencing the chairman from SEBI actions against the company (National Securities Depository Corporation) he headed, Mr Bhave was chosen. This ring-fencing has not worked and various actions by him to bury the indictment of NSDL have done enormous damage to SEBI's reputation as a regulator.
Interestingly, Mr Bhave’s appointment coincided with a big overhaul in SEBI’s top brass. Two whole-time members, whose terms came to an end, were replaced by three new names. The executive director (law), who was under a contractual appointment under Mr Damodaran, was also replaced by another contractual appointee. Sources inside and outside SEBI have blamed some bizarre orders on the fact that the executive director (law) is not a whole-time employee but beholden to the current chairman for his continuance.
One of these is the manner in which an advance ruling was handed to Bharti Airtel saying that it need not make an open offer in the event of a merger with the South African telecom giant MTN. The order was issued over a weekend, even before the payment for the ruling was credited to SEBI’s account. Who in SEBI gained from this won’t be clear without an investigation, but it is undoubtedly a serious matter. (Read, ‘SEBI allowed Bharti Airtel to avoid takeover norms, allege some shareholders and approach SAT, http://www.moneylife.in/article/72/10402.html)
There have been many such decisions that have raised eyebrows in the past three years. SEBI’s tearing hurry to clear all cases pertaining to the IPO scam through the consent process is another issue. The manner in which SEBI has made no attempt to strengthen databases and public information available to shareholders is another example.
The irony is that one of SEBI’s last actions has been the Bimal Jalan committee, which has waxed on about the stock exchanges roles as first-line regulators being the excuse for discouraging their listing. In the past three years, stock exchanges have made almost no attempt to fulfill this role. They have routinely ignored the fact that companies either don’t bother to fulfill disclosure requirements under the Listing Agreement or are not entirely truthful about their disclosures.
Even with regard to broker regulations, a stunning statistic that came into the public domain was that 85% of all arbitrations went against investors. Yet, SEBI decided to hike arbitration fees charged by stock exchanges (a decision that ought to have been left to the bourses) in order to help the monopolistic National Stock Exchange (NSE). In fact, even the competition commission seems to be veering around to the view that NSE—apparently a first-line regulator according to the Jalan Committee—has used its monopoly muscle to suppress competition from the Bombay Stock Exchange, according to a report in The Mint.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam