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.