SEBI (Securities and Exchange Board of India) was established in 1988 by Govt of India. After Harshad Mehta scam of 1991 it was made an autonomous regulatory body on the lines of SEC( Security Exchange Commision) of America. SEBI was made to bolster investor confidence and keep an eye on market transactions. With the inception of Sebi it was expected that secutrity markets will be integrated over a national level. In the current scenario of financial markets where numerous financial instruments like Insurance, Mutual Funds , Derivatives(introduced in the year 2000) etc have come into picture; the role of Sebi has become more important. But majority of times Sebi proved to be a Watch Dog without teeth. Sebi has failed in implementation of regulations and bringing convicted participants of market to justice. Sebi is responsible for working of all the Stock Exchanges and transactions relating to equities.
There have been many instances when Sebi was caught napping. During the period between 1998 – 2002, Share market has seen numerous cases of insider trading. This led to the Price manipulation ahead of any Mergers and Acquisitions, declaration of dividends or any other corporate acts. Sebi wasn’t able to nail even a single accused. Height of insider trading was when President of BSE Anand Rathi called up executive arm of BSE to obtain information on other broker ( Ketan Parikh) ; which is considered wrong. Every uptrend in share indices is neglected by Sebi . The result is atmosphere of speculation and rumors around specific Companies and brokers. It is a known fact that few high profile brokers and institutional investor play a major role in the uptrend spiraling of their prices. But Sebi turns blind eye to most of these serious issues. It seems Sebi never learns from the past.
There is no fear of Sebi in financial market. The profile of regulator is judged by its conviction rate; which is very low in case of Sebi. Most of the time SAT (Security and Appellate Tribunal) has given overturned its decisions. The amount of surveillance expected from a Sebi is not achieved.
In this age of computerization, strong IT surveillance is a must for Sebi. Even after its multiple claims of dexterity, Sebi was caught with its pants down in month of October this year when a single investor was caught with (hold your breath) 5000 demat accounts so that he can multiply his chances of getting maximum shares in IPO. Manipulation at such a lower level going untraced is a shame. I am amazed how that person with multiple demat accounts paid his annual maintenance charge. For a standard demat account the maintenance charge is 500 Rs. This means he must have also made an arrangement (by crook) to see to it that it is waived.
Sebi has not learned any thing from Harshad Mehta Scam, Ketan Parikh Scam, Home Trade Scam, etc. Even today the report of development of case against many FIIs; on removal of money from market on the day when Sonia Gandhi aka congress won election (black Friday), has not been made public.
What Sebi needs is total autonomy and highly trained and educated Experts from the field of
Finance, Banking, Accounting, Management and Law.
The future of Stock Markets is heavily dependent of workability of its regulator.