Market participants and companies often complain of high-handed regulation by the Securities and Exchange Board of India (SEBI), but the truth is that regulations and regulators abroad are stricter than in India, said Securities and Exchange Board of India Chairman U. K. Sinha.
Speaking at the 178th Annual General Meeting of the Madras Chamber of Commerce and Industry here on Thursday, Mr. Sinha said: “Earlier, SEBI was called as activist, now we are called dragon. Have we become a dragon?”
“Country after country is focusing on tightening regulation. Regulators feel that imposing a penalty on the company is not good enough as it only added to their cost of doing business. They now penalize key management personnel for violations,” Mr. Sinha said in a speech notable for its tone of plainspeak. Referring to threats from India Inc that investments will shift abroad if regulation becomes high-handed, he asked: “Regulations abroad are stricter than in India. Which regulatory jurisdiction will you go to?” He pointed out that compliance with SEBI regulations by companies still leaves a lot to be desired. “More than 1,100 companies are delinquent in complying with Clause 35 and 900 companies with Clause 49,” Mr. Sinha said adding that it was better to spend time on compliance than in defending violations later.
Referring to a case where the annual general meetings of four companies were finished in 15 minutes with all resolutions passed, Mr. Sinha said: “But, we don’t want that to happen. People will vote electronically. That’s why we want the shareholders to get the right to vote.”
The regulator also cautioned companies to be careful when it came to pricing IPOs. “In the last three years, two-thirds of companies that raised funds are now languishing below offer price. Then what sort of interest, you are expecting from the investors. You have to be careful what price and in what manner you have to raise capital. Raise capital on long term basis and investors’ interest has to be taken into account,” was Mr. Sinha’s advice to the firms.
REIT guidelinesThe SEBI chief said that next month they would be coming out with guidelines on Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts that would help the retail investors and provide easier finance option to developers.