SEBI Chairman’s appointment: buck stops at the PM

An accusatory letter by a Whole Time Member, an unusual writ petition by some eminent citizens, an explosive rebuttal by the finance ministry and the buck of senior appointments at the capital market watchdog again stops at the Prime Minister

At the end of the day, it may boil down to an outgoing director’s pique at not getting a two-year extension at the Securities & Exchange Board of India (SEBI) or a well-paid-perked directorship at its National Institute of Securities Management (NISM). SEBI’s director K M Abraham’s letter to the Prime Minister (PM) hurling a slew of stunning allegations at the new incumbent, Mr U K Sinha and Finance Minister Pranab Mukherjee has caused a heap of dirty linen to spill into the media. This will hopefully have the salutary effect of a much needed clean up of an extraordinarily arbitrary, high-handed and increasingly corrupt regulatory body. But an unintended consequence of the many rivalries is that it again exposes the failure of Prime Minister Manmohan Singh.

Clearly, a well-orchestrated plan has gone awry; but those of us who follow the news closely can now see a clear pattern.
* It started with a series of reports about how and why Chairman C B Bhave and his two whole time directors did not get a five-year term as had been proposed and put on hold over a year earlier. These reports appeared despite the fact that U K Sinha’s appointment as SEBI chairman had already been announced. Those of us who track SEBI regularly, knew that a five-year term for Mr Bhave and the directors had been mooted within months after their 3-year appointment but had been put on hold by the Finance Minister long before their term ended. Why then did it make news when it was no longer relevant?
* Soon after, media reports selectively carried portions of K M Abraham’s letter to the Prime Minister (PM). He portrayed himself as a whistle blower and alleged that Chairman U K Sinha, under pressure from Finance Minister (FM) Pranab Mukherjee was diluting SEBI action in four specific cases. Strangely, the full letter was made public only on 28th October by First Post which obtained it through an RTI filing. (
* Moneylife then scooped U K Sinha’s rejoinder to Abraham’s charges, which showed there had been no dilution in SEBI’s stance in the four named cases even the allegations of political pressure were true. Sinha also alleged that Mr Abraham was mentally disturbed, in the habit of secretly taping people and had repeatedly sought an appointment in NISM which was apparently assured to him by Mr Bhave.
* Next, the media reported another letter from Dr K M Abraham to the PM, where he claimed that he and his family were under threat because the PM’s office had forwarded his letter to the Finance Minister, who was the prime subject of his complaint.

* In the meantime, a group of eminent citizens have filed a public interest litigation alleging that the constitution of the search committee for appointing the chairman and directors was altered to give the finance minister more say on the selection. Since the case is sub-judice, we are reproducing the writ petition and the affidavit verbatim.

Moneylife has pointed out that the recommendation of the appointment committee has been frequently ignored in selecting the SEBI chairman. ( We pointed out that even C B Bhave was not on the list forwarded by the committee. Worse, he was appointed despite an on-going litigation by the National Securities Depository Limited (NSDL) which he founded and headed for over a decade, with SEBI. All this has now been reiterated by the Times Group on 13th and 14th November.  In fact, the then Joint Secretary K P Krishnan called senior journalists to explain how Bhave would be  “ring-fenced” from NSDL related issues. The fact that the ring-fence did not work and all NSDL’s wrongs were sought to be buried have been extensively reported. Media reports now reveal that P Chidambaram pushed for Mr Bhave’s appointment even when he had told the selection committee that he was not interested in the job. In fact, Mr Bhave had taken the unusual step of appearing before the selection committee, despite not wanting the job, only to be able to air his grievances against then SEBI Chairman M Damodaran, who had initiated action against NSDL in the IPO (Initial Public Offering) case of 2006 and appointed a two-member bench of the SEBI board (comprising Dr Mohan Gopal and V Leeladhar) to look into the issue. The negative findings of the bench were first sought to be buried by SEBI and later declared null and void until the displeasure of the Supreme Court forced a volte face. 

Now we come to the interesting part of the new PIL. The writ filed by eminent citizens says that orders to extend the term of C B Bhave and the two whole time members from three to five years was “reviewed and negated” and the rules for the composition of the selection committee were amended to give more powers to the FM. Anyone who has followed SEBI closely (unlike the petitioners in this case) is in fact rather shocked and surprised at the quiet and surreptitious move to extend the term of the chairman and his two whole time members through the petition.
What if the apex court goes into issues that the eminent citizens have ignored? For instance, who proposed the move to grant this extension? Wasn’t it the same finance minister (P Chidambaram) and Joint Secretary (Dr K P Krishnan) who stood by and allowed SEBI to throw out an order of its own bench in the NSDL matter? Wasn’t this the same finance ministry team which stood by and allowed Dr Mohan Gopal to be so humiliated that he did not attend any SEBI board meeting towards the end of his tenure?
Or, what action was taken by the government and the finance ministry on the explosive and anguished letter to the PM by Dr Mohan Gopal (who headed the National Judicial Academy and has taught at Harvard Law School for over a decade before returning to India) about capricious functioning of SEBI under Mr Bhave (é-of-sebis-functioning-under-bhave/16246.html).

Since the buck stops at the PM, it could well be that these issues are not likely to be raised before the apex court. But if they are, a few surprising skeletons could tumble out and expose the many machinations and vested interests at work behind the scenes.




5 years ago

It's delusional for Ms. Dalal to keep grinding an axe time in and again, trying to justify what the FM does. NDSL & the IPO scam is not the issue here. The issue is indeed if the current management in SEBI is going slow on RIL, BoR, Sahara and the likes. For the moment, it looks like no action worthwhile has taken place that will cause for the guilty to be labeled so punished appropriately. That's what the complain is all about and not the diversion that's attempted here.

Dr Vaibhav G Dhoka

5 years ago

In this scam era most of the originate from PM's failure to take FIRM stand.He himself admits all his failure to COALITION DHARMA. It is pitiful condition for our nation and in this particular case of SEBI it is pitiful to whole investor community but cheers for brokers and other market intermediaries.Due to corrupt SEBI What is left for INVESTORS is just a GUESS.


5 years ago

Regardless of the way the selection was done, seems like sinha is more likely to succumb to govt & corporate pressure. bhave had a good reputation in this regard



In Reply to Anisha 5 years ago

Clearly, you have neither been following anything abut Bhave nor have you understood anything about Bhave mentioned in this article, assuming you have read it


In Reply to madhur 5 years ago

Every time there is an adverse comment on U K Sinha or a favourable comment on C B Bhave, the Moneylife digital team comes with a comment against the reader. The publication is clearly following an agenda of certain people and is in no way free and fair.


In Reply to Abhinav 5 years ago

Can we say the same for you Abhinav alias Himanshu? Why are you posting comments with different names. Why not use your real name and email ID. Let others also know who is following who?
BTW: We captured your IP and keeping a tab on it.

mitul Desai

5 years ago

Dear Group of eminent citizens who have filed a public interest litigation challenging appointment of U K Sinha,
Divert your energy in fighting corruption instead of wasting time and getting publicity.

Krishnaraj Rao

5 years ago

Ah! The cozy relationship between Pranab Mukherjee and Omita Paul again raises its ugly little head -- this time in SEBI. And Prime Minister is silent as usual.

Good reporting, guys!


Madhusudan Thakkar

5 years ago

This incident clearly proves that MMS is one of the weakest PM our country has ever seen.On the issue of PM's inclusion under the ambit of Lok Pal MMS had said that personally he would like himself to included but his cabinet colleagues are opposed. Now we know these cabinet ministers.In today's TOI also there is an detailed account how Chidambaram had final say in the appointment of Bhave as SEBI chief.According to Dr.Swamy Chidu is one of the most corrupt politician of Congress party with substantial exposure in stock market[How can we forget Fairfax ] and had vested interests in appointment of Bhave .The rivalry between Chidu & Pranab Mukherjee is very deep.The so-called truce is temporary.Looking forward to in depth investigation from MoneyLife team

Will ICICI Pru US Blue Chip Equity Fund pull off what 90% of US fund managers cannot?

Most US fund managers cannot beat the popular benchmark S&P500 over the long term. Will this new fund ICICI Pru be able to achieve this difficult task?

ICICI Prudential mutual fund has filed offer document with SEBI to launch ICICI Prudential US Blue Chip equity fund, an open-ended developed market equity fund. The fund will invest in equity and equity related securities of companies listed on New York Stock Exchange (NYSE) and NASDAQ.  The performance of the scheme will be benchmarked against S&P 500.

Does investing in this fund make sense? Only about 30% of mutual funds beat the S&P 500 in any given single year. And if you are lucky enough to pick one of the 30% that do beat the S&P, how likely is it that the fund will beat the S&P in two straight years, or five straight years or even 20 straight years? The longer the period, the fewer are the winners.

The potential to outperform the market is one advantage that actively-managed funds have over index funds, and this notion of outperformance is attractive to investors. After all, why settle for an index fund when you know you will only receive the market return, less a nominal fee, to the fund’s manager?

Unfortunately, evidence that actively-managed funds can consistently outperform their relevant index is difficult to find in the US. It’s even more challenging for an individual investor to identify which actively-managed fund will outperform the index in a given year.

Actively-managed funds start at a disadvantage when compared to index funds. The average ongoing management expense of an actively-managed fund costs 1% more than its passively managed cousin. The expense issue is one reason why actively-managed funds underperform their index.

Another issue, which is not reflected in fund return numbers, is that the portfolio manager of an actively-managed fund -- who is in search of extra returns -- buys and sells investments more frequently than an index fund.

The evidence shows that there are good active managers, but finding such managers in advance of their outperformance is difficult. More importantly, as a Barclays study suggests, uncertainty always surrounds the good managers. Can they continue to outperform?

The largest and most well-known index fund is the Vanguard S&P 500 Index Fund. This index fund attempts to match the Standard & Poor’s 500 Index. How well has it done? Over the last ten years it has beaten the performance of over 90% of all domestic equity mutual funds  and also over the past three and five year periods! Are you a good enough investor (or lucky enough) to be able to pick the 10% of mutual funds that will beat the S&P Index? Probably not. Will ICICI Pru will be the one of 10%?

How can we justify that ICICI Prudential US Blue Chip equity fund would be able to outperform its benchmark S&P 500, when even the US Index funds find it difficult to do so. And what unique foresight does ICICI Prudential US Blue Chip equity fund manager have which will make him better off than the US fund managers? Only time will tell.

Finally, we are not sure who from India would want to invest in US stocks since S&P500 has grossly underperformed emerging markets over most periods.


Only 15% private sector employees investing for retirement: Study

According to a study conducted by Metlife International, only one in four Indians has taken any step to prepare for retirement and even fewer—one in six—have begun planning for it

As low as 15% of employees in the private sector have started investments for retirement so that they can maintain the level of living standard post the work period, says a study by Metlife International.

"Though retirement looms as a source of financial worry, few Indian employees are taking steps to prepare for it. Only one in four Indians has taken any step to prepare for retirement and even fewer—one in six—have begun planning for it," said the 2011 International Employee Benefits Trends.

In three emerging markets including India, there is also a high level of financial anxiety, it said, adding that this concern is coupled with an even greater lack of preparedness for both retirement and shorter term financial eventualities in countries whose combined total population is 1.5 billion.

In India, a full 85% of those surveyed had not taken any steps to plan for retirement, the study said.

Analysing low level of planning among Indian employees, the report said, cultural factors could be at work here. Fully half of all Indian employees say they do not plan to retire.

This could reflect the relatively young age of the working population, an ambitious, entrepreneurial and interested group highly motivated to improve their standard of living, the study said.

It could also be related to the tradition of older family members being taken care of by their children in India. While it is not their number one concern, a full 55 per cent of employees in India say they are extremely concerned about having enough money to provide for elderly parents or in-laws.

The study, released recently, is based on the survey done across seven major cities in India and 1,090 employees were part of it.

It highlighted that although the wages have appreciated but employers still continue to provide limited benefit to employees.

"While foreign multinationals have caused wages to rise in certain sectors and are influencing the types of benefits offered, Indian employers nevertheless continue to provide only a limited benefit offering to their employees," it said.

With the exception of health and critical illness insurance, less than half of all employers offer any other products. The labour surplus and cultural factors, plus the cost of benefits, continue to play a role here and influence employer attitudes as they did in the first survey four years ago, the study said.


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