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Sebi board meetings get meatier as agendas balloon in under new chief

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Market participants say there is a visible change in the momentum of reforms. Some even say they are finding it difficult to keep pace with the changes

India’s $3.5-trillion equity markets are witnessing reforms at a faster clip under Madhabi Puri Buch, who took charge as chairperson of the Securities and Exchange Board of India (Sebi) in March 2022. Sample this: The average number of agenda items during the five board meetings conducted under Buch increased to 11 compared to about eight each during her three predecessors, for which data is available.

Sebi’s board meeting scheduled for next week is likely to be equally action packed, given the number of discussion papers floated by the regulator in recent weeks, said market players.

“This demonstrates the eagerness of the new chair to bring about changes as soon as possible with an objective to improve integrity of the securities market,” said JN Gupta, managing director (MD), Stakeholders Empowerment Services (SES) and former executive director at Sebi.

To be sure, it is still early days in Buch’s tenure but a host of market participants that Business Standard spoke to said there is a visible change in the momentum of reforms. Some even added that they are finding it difficult to keep pace with the changes.

At the last meeting held on March 29, Sebi’s board approved a host of reforms in areas such as mutual funds, alternative investment funds (AIFs), debt markets and corporate governance. In the preceding board meetings in September and December 2022, Sebi’s board deliberated and approved over a dozen key agenda items.

Since the last board meeting, the regulator has issued close to 20 discussion papers.

Some of the key reforms that could be taken up include shortening timelines for initial public offerings (IPO) to three days from the current six days.

They also include a comprehensive review of the so-called total expense ratio (TER) charged by the mutual fund industry, mandating more disclosures from foreign portfolio investors (FPIs) and measures for cracking down on suspicious trading activity as well as misuse of unpublished price-sensitive information (UPSI).

Market observers say many of the new proposals floated by Sebi are game-changing and will help deepen the domestic markets. They will reduce the scope for manipulative practices, although implementing them could be a challenge.

Legal experts and ex-Sebi employees said the systems and processes at Sebi have seen a sea-change to usher in a more efficient reform process.

“Sebi’s efforts in enhancing its internal processes, such as streamlining procedures and improving coordination between departments have contributed to faster decision-making. Additionally, advancements in technology and digitisation have facilitated quicker data processing and analysis, enabling Sebi to make informed decisions promptly,” said Sumit Agrawal of Regstreet Law Advisors and also a former Sebi staffer.

Sources said Sebi has started following an ‘output-based staffing’ model. Under this, an organisation tries to increase its productivity by focusing on key-performance indicators even if it is not able to increase headcount.

Over the past few years, Sebi has moved to a consultative-based approach for market reforms. Players in the market ecosystem are expected to send their comments and feedback on various proposals floated in the discussion papers. The regulator, after taking all views on board, takes up the proposals to its end. Once the board approves, Sebi makes amendments to its regulations or issues relevant circulars to make the changes effective.

While many stakeholders are hailing Sebi’s fast-paced approach, some say the changes are too-fast-too-soon.

“Issuing consultation papers on contemporary issues and then heading for necessary changes is what evidently makes Sebi distinct from other regulators. The process is undoubtedly welcomed. However, with timelines as short as two weeks for submitting observations is quite short as the changes being proposed do require the widest possible and conclusive deliberations,” said Harish Kumar, partner, Luthra & Luthra Law Offices India.

Between May 12 and June 19, Sebi issued 19 discussion papers, with 11 of them being over a three-day period.

“As there has been a surge in consultation papers, which are later approved with minimal changes, there has been some lacunae in providing clarity and explanation to the terms and expressions provided for. This has made the proposals, at times, subjective,” Kumar added.