Unfazed by criticism that the market regulator acts like ‘activist’ working against business interests, SEBI Chairman U.K. Sinha on Saturday said it will continue to take steps to build investors’ trust which has been hit hard often by manipulation and fraud.
“We take each of our decisions after active consultations (with public and other stakeholders), and take measures after that. But, it hurts when you people call us activists (working) to affect your business,” Mr. Sinha said.
Addressing the annual International Convention of ANMI (Association of National Exchanges Members of India), the SEBI chief said the measures that SEBI takes for risk management or investor protection should not be seen as a burden by the entities concerned.
“Whether you like it or not, we have to respond to the needs of the society and we have to be guided in long term growth. So, don’t think, we are trying to be activist, as what we are trying to do is to generate a long-term trust in the Indian market,” he said.
Mr. Sinha noted that developing investor trust and certainty with regard to law and legal position were among the key factors to sustain growth in the country.
However, the SEBI chairman said that the recent scams and misconduct in the market has eroded investors trust.
He also observed that investors have been losing money as more than two-thirds of the companies that hit the capital market are trading below their issue prices.
Mr. Sinha said SEBI has taken several steps with respect to requirements and protection of investors.
These measures include e-IPO, call auction on the opening day of an IPO, disclosure requirements, expansion of investor grievance redressal mechanism, certain obligations on merchant bankers, and simplified advertisement code as well as product labelling for mutual funds.
“Some people may find it very irritating that why SEBI is getting into, for example, labelling of products, but we want sustainable growth in the market and to generate trust in the market,” Mr. Sinha said.
According to him, these measure have had positive impact in the capital markets.
On enforcement actions, Mr. Sinha said regulators across the world “are realising that passing a penalty order against the company is been taken as extra cost of doing business so now more and more penalty is been passed against individuals”, and SEBI has been following the same example.
He said: “Last five years, it has been proved within India and outside India that it is no longer situation where it is business as usual. People are becoming more demanding and more aware and their requirements have to be taken into account.”
The chiefs of premier stock exchanges, BSE and NSE, said that gaining investor trust is crucial for development of the capital markets.
According to BSE Managing Director & CEO Ashish Kumar Chauhan, capital markets have “not done a great job in channelising the saving of people and gaining their trust to invest in stock markets“.
NSE Managing Director & CEO Chitra Ramkrishna said that for deepening and widening the investor base one has to focus on growth of financial products such as Exchange Trades Funds, derivatives and fixed income products.
She also that the government is launching the CPSE ETF as a product with the right composition and returns. “It will be a very good product for both retail and institutional investors.”
She added that there are three game changers for the markets to sustain and accelerate growth: bringing in pension funds, encouraging funds like ETFs and filling the gaps by bringing in missing products in the derivatives segment.
The pension funds have a social objective of providing retirement income for the aged population.