Regulators pretend all is well, in response to the most glaring violations we report

A few weeks ago, the Securities & Exchange Board of India (SEBI) decided to break its established practice of responding to the media only through its communications department and sent us an aggressive letter defending the actions it has taken to help investors of portfolio management schemes (PMS). The letter and our response have been published on our website. But it is the first time in nearly six years that SEBI has chosen to respond to an issue, that too in writing. Readers of Moneylife know that we have been fighting a two-year battle to force transparent disclosure of PMS performance. We filed an application under the Right to Information (RTI) Act, won an appeal to the central information commissioner and only then was the regulator forced to publish performance data of these schemes for high net-worth individuals. SEBI’s letter makes no mention of it, or of our pending appeal to put out more comprehensive information. However, it establishes that the regulator does read what Moneylife has been writing, fortnight after fortnight.

So what conclusions does one draw when SEBI does absolutely nothing about the brazen manipulation of stock prices that we have been reporting in our section called “Unquoted” for the past four years? Or, when it does nothing about the shenanigans of the McDonald’s franchisee, Westlife Development, whose share price is locked at the upper circuit with volumes of just one share on most days (the stock rose 220,000% without attracting any action from SEBI or the stock exchanges)? SEBI’s letter, more than anything else, is an indicator of the brazen lack of accountability of India’s independent regulators.

The parliament and its committees, which are supposed to act as natural checks & balances, do not go beyond cursory questions and have no time to examine the opaque answers. Meanwhile, the regulators are arming themselves with greater powers over people and companies which can be wielded with the same deadly effect as other investigation and enforcement agencies. SEBI is not alone in this attitude. The insurance regulator, conveniently located at Hyderabad, rarely responds to or engages with consumers.

Take this example. Moneylife’s Cover Story on how a barely literate retired railway ticket-checker, Arvind Injamuri, was a victim of shocking mis-selling by officials of Reliance Insurance. Some of the policies sold to him smacked of fraud and forgery. Yet, after our persistent follow-up, all IRDA (Insurance Regulatory Development Authority of India) did was to ask the company to cancel the policies and return the money with interest. The same Reliance Insurance has a corporate agent called AB Capital, which is enticing the gullible to buy insurance policies with the outrageous promise that they will receive interest-free loans of up to 10 times the premium. Moneylife Foundation’s insurance helpline has helped 15 people get back over Rs5 lakh. We have written to the regulator and also briefed him at a Mumbai seminar. No action or response.

The Reserve Bank of India (RBI) is far more open, but has no formal mechanism to engage with consumers. Even the chambers of commerce, whose collective financial muscle ought to give them some clout, only lobby the interests of powerful office-bearers. Consequently, new laws, with far-reaching implications for companies and for the national exchequer, have been hurriedly passed by parliament with perfunctory discussion. Educated, tax-paying savers need to start thinking about the long-term consequences of these issues.