Regulations
The stink coming from SEBI-II

Chairman UK Sinha’s analysis of the “Possible Causes” for Dr KM Abraham’s (former whole time member of SEBI) many allegations against him and finance ministry officials, includes anger, delusion, insecurity complex, severe emotional stress and many others

SEBI chairman UK Sinha's first six months in office have been a trial by fire. In his note, he analyses the "possible causes" for Dr Abraham's extraordinary action of levelling a series of serious charges against him. The explanation only points to the need for a major overhaul in the staffing and working of the capital market watchdog.

a)    UK Sinha says that Dr Abraham circulated a note to the SEBI board wanting a resolution and discussion on his allegations that he was being harassed at the 'behest of a corporate entity' and at the instructions of certain officials of the Ministry of Finance mentioned in the note.

b)   Mr Sinha then refers to what can only be termed Dr Abraham's strange sting operations inside SEBI. He writes, "He also told me that he keeps a recording of his phone calls and has got a device to record the private conversations that he has with people without alerting or letting the other person know that the conversation is being recorded by him. I told him that such conduct is unethical and unbecoming of a civil servant and he can selectively use it to harm other people without alerting them".

c)    Mr Sinha says that "in his conversations he (Dr Abraham) made scathing comments on certain officials of the Ministry of Finance. The most severe ones have been reserved for the current joint secretary, capital markets who is from the same cadre as Dr Abraham".

d)   Mr Sinha says, "I tried to counsel him to be moderate in his comments, but he appeared to be under severe emotional stress and a delusion that everybody was out to harm him and his family. He has also told that he comes from a well known media family of Kerala and that he is going to 'teach a lesson to everybody involved in harassing him'. His behaviour is being erratic and he seems to under some delusion about threat to his family. While the other WTM (Whole-Time Member) Mr Sahoo has also been facing a similar probe by the CBDR, he is facing the same stoically as a civil servant".

e)    National Institute of Securities Management (NISM): If Mr Sinha is to be believed, despite his harassment, Dr Abraham was keen to hang on as Director of NISM, a hugely well-funded body that is apparently not accountable to either the CVC or the Comptroller and Auditor General. Mr Sinha's letter says that one week before his departure, Mr Bhave had recommended Dr Abraham's appointment for a 5-year term on a compensation of Rs2.50 lakh per month and also house, car and other benefits. He says, "However, Mr Bhave hesitated in passing the final orders in his capacity as Chairman, SEBI—and marked it for his successor to take a decision. Dr Abraham has raised this matter several times with me in person and requested me to the point of embarrassment that I should clear the file for his appointment". Mr Sinha explains that the rules required the selection committee to put up three names, but in this case only Dr Abraham's name was recommended.

f)     According to Mr Sinha's letter, Dr Abraham was keen on staying on in Mumbai for family reasons and said that 'maintaining two establishments would lead to financial hardship to him. Maybe this was one of the reasons for the afterthought in his mind in inventing these allegations. It is also a matter of record and public knowledge that Dr Abraham and Mr Sahoo were expecting an extension of their tenure from 3 years to 5 years. The government in its wisdom decided not to grant extension". All these decisions, he says, were taken before he came to SEBI. Indeed, even Mr Bhave had lobbied hard for his term to be extended to 5 years.

In our view, the very fact that a new SEBI chairman is constrained to answer to such allegations from an outgoing member with a dubious record, just four months after taking charge, points to a deep malaise in the capital market regulatory body. Moneylife has already argued that the SEBI chairman cannot be allowed to bring in a coterie of officials (as Mr Bhave and Mr Damodaran were allowed to do), who owe allegiance to the chairman and not to the organisation or public interest. Also, key departments such as investigation, secondary markets and legal must have a degree of independence and not operate at the whims of extraordinarily powerful Whole Time Members (WTMs) on a short stint.

User

COMMENTS

Amit

5 years ago

Can Mr. Abraham explain the consent order on Reliance Securities Limited, to which he was one of the signatories.

Whereas Reliance Money Limited practically operated as as stock broker, in active collusion with its affiliates, without being registered with SEBI / FMC, neither a member of the Stock / Commodity Exchanges, and therefore evaded all compliance and service liabilities, including evasion of taxes, SEBI did not deem it fit to go into the merits of Reliance Money Limited, an independent company.

Maybe Mr. Abraham can explain if the confusion existed in the minds of the investors, or the consent order is an example of serious wrongdoings within SEBI ?

A paltry fine... what a joke. Since, Mr. Abraham let off murderers himself... I do not know what is he complaining about.

Nagesh KiniFCA

5 years ago

No Chairman should be permitted to bring a cotorie of his chamchas. All should be weeded out. Remember Lord Tennyson - "Old order changeth, yielding place to new"?
The practice of extending terms and kicking up the old foggies to newly created setups should stop.
Get new and younger talent and professionals for the job instead of picking up disgruntled North Block babus with Delhi mentality.

Rambabu Shastri

5 years ago

The whole Govt. machinery stinks. As long as politics is inseparable from the administration, this will always be the scenario.

BTW, SEBI in my opinion is useless. Nothing can tame a greedy nation with greedy brokers, regulators and politicians. Everyone is now in a rat race... that of greed. How else can we explain the fiasco of a hearing of Vaswani Industries that cooked the whole IPO and got off lightly.

Corruption has ruined India and it is time for every honest citizen to either fix it, or if it cannot be fixed... migrate and grow it elsewhere.

Dr Vaibhav Dhoka

5 years ago

It was on assumption of office of Mr U K Sinha I mailed him greetings of congratulation and attached a grievance against Kotak Sec.Ltd a stock bro-king firm since July 2004 though SEBI is legally bind to investigate and resolve the same.All previous chairmen dillydallied for reason as stated above and broker SEBI(official)nexus as KSL boss is member of advisory committee set by SEBI for investor but For Mr Sinha he thanked for greetings and immediately as
ub: Grievance against stock broker / sub-broker

Madam / Sir,

1. We understand that you had lodged with SEBI a complaint against KOTAK SECURITIES LTD which was assigned the acknowledgement / reference number 2010/0014458/01 by SEBI.

2. You are advised to confirm whether the aforesaid complaint has been resolved. In case, however, your complaint still remains unresolved, please send us the copy of the complaint once again and any other relevant correspondence exchanged with stock exchanges / broker / SEBI, by return post at the following address or the email address to enable us to facilitate redressal of the same.

Address
Email address
Mr. V S Sundaresan
Chief General Manager, MIRSD-2
SEBI Bhavan, Plot No. C4-A
“G”-Block, Bandra Kurla Complex
Bandra (E)
Mumbai-400051
[email protected]

3. If no reply is received from you on or before April 08, 2011, the complaint will be treated as closed.
But with this no further action.What kind of REGULATOR we have? or is it our destiny to have such deaf and dumb REGULATOR.

Whistle Blower

5 years ago

I think 3 more people need to be shown the door.

1. P K Nagpal, ED - SEBI
2. Prashant Sharan, WTM - SEBI
3. Dr Thomas Mathew, JS (CM), Min of Finance

Meenal Mamdani

5 years ago

I have been a dedicated reader of Ms. Dalal's columns. I admire the clear explanation of matters involved and the blunt way that blame is laid where it belongs.
If only all the journalists followed her example and did not pull their punches to suck up to the powers-that-be, then we would not have the extent of corruption that is present in today's India.
She truly deserves an award from the govt and an enormous thank you from the public for her hard hitting articles.

amitg

5 years ago

The earlier SEBI regime was run by autocrats who ran the whole show as if Aurangzeb was running Delhi. There can not be a deadlier combination of incompetence and arrogance. All the top four -five people broght by Bhave had no exposure to being a public authority in their life. They were mere tools in the hands of Chairman who used them and abused their office the way he wanted. Ultimate fault lies with Finance Ministry for allowing such incompetent people for such responsible positions.

REPLY

Whistleblower

In Reply to amitg 5 years ago

I think 3 more people need to be shown the door.

1. P K Nagpal, ED SEBI
2. Prashant Sharan, WTM
3. Dr Thomas Mathew

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