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Buch completes one year, marked by big-bang reforms

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“She is a complete hands-on person and prefers cross-checking the numbers herself on excel when taking data-related decisions,” added another person.

Madhabi Puri Buch has completed her first year as the chairperson of the Securities and Exchange Board of India (Sebi). A whole time member of Sebi from April 5, 2017 to October 4, 2021, Buch assumed charge as the Sebi chairperson on March 2, 2022.

The first woman chairperson has tried to inculcate a culture that is more closely aligned with the corporate world. The thrust has been on leveraging technology and formulating regulations backed by data. She recently introduced gender-neutral leaves, including one for surrogacy, making Sebi the first regulator to implement such a move. The buzz is that this year several young officials have been promoted as chief general managers.

“Under her leadership, Sebi has adopted a level of professionalism, usually associated with private organisations. She means business while remaining open to ideas. As a result, Sebi’s turnaround time has significantly improved. So far, she has ensured that any irregularity or scam does not have a ripple effect and is contained,” said Sumit Agrawal, founder, Regstreet Law Advisors.

“She is a complete hands-on person and prefers cross-checking the numbers herself on excel when taking data-related decisions,” added another person.

Under Buch, Indian equities have successfully made the transition to T+1 settlement this year, ahead of countries such as the US and Canada. This is despite resistance from foreign portfolio investors due to time-zone differences.

Under her leadership, Sebi has taken proactive steps to regulate mutual funds, alternative investment funds and stock brokers, which will strengthen the securities market in the long run, said experts.  

Sebi has brought mutual funds under the ambit of the insider trading regulations, aligning it with the PIT provisions applicable to listed companies. Although this was a reactive measure that somewhat blurred the lines between front running and insider trading, the amendments are expected to have a significant impact on market participants, both within and outside the MF industry.

Buch has lobbied with the government for more powers to intercept data on social media platforms to enable the regulator to crack down on unsolicited stock tips, as well as instances of insider trading and front running.

Sebi has decided to gradually phase out the mechanism of companies buying back shares through the open market in order to create a level playing field for investors. The amount for buyback of companies through open market has increased from 50% to 75%. Also, companies are allowed to increase the buyback price until one working day before the record date.

The regulator has taken steps to prevent misuse of client funds by brokers and is gradually moving towards an Asba-like settlement for the secondary market.

“The chairperson has reviewed and upgraded some of the archaic laws such as REITs, norms related to buyback, public issues, AIFs, investment grievance redressal mechanism and role of MF trustees. She has moved swiftly to strengthen the regulatory framework for public issues after a flurry of troubled IPOs, particularly those from the start-up sector,” said Sandeep Bajaj, managing partner, PSL Advocates & Solicitors.

The regulator has deftly handled issues surrounding the LIC IPO, allegations of front running at Axis Mutual Fund and concerns over start-up valuations. A number of startup firms that listed in 2021 and early 2022 tanked on the bourses, prompting the regulator to mandate better disclosures on pricing and valuations. While the start-up IPOs have since dried up, the step has been viewed as positive for investors.

An important amendment was to delegate power to quasi-judicial authorities, which has effectively reduced the burden of pending cases on whole time members and led to an increase in the disposal of cases, while the overall control still remains with the board, said Agrawal.  

There has been some criticism around regulatory overreach. The month of February, for instance, saw 17 consultation papers floated by Sebi.

Sebi, as an institution, continues to be in a face-off with the Securities Appellate Tribunal (SAT) and in certain cases even with the Supreme Court. In a recent matter on the NSE co-location case, the SAT observed that Sebi should have been more proactive in its approach. The preference for appeals or review petitions in matters that are well settled, without considering the merits of the case, solely to keep the order in abeyance, needs be reviewed, said experts.

“The reason for Sebi’s apology in the Reliance case or hard-hitting rulings in certain insider trading cases are indicators that cannot be overlooked,” said Agrawal. “Handling issues like the Hindenburg report (against Adani Group), emergence of new technologies and instruments, clearing the backlog of old investigations, non-uniformity among various officers of Sebi while passing orders and the pace of frequent changes to the regulations are some of the challenges Sebi needs to deal with under her chair.”