Will SEBI Consider In-House Calibre for ED Post This Time?
An advertisement by the Securities and Exchange Board of India (SEBI) seeking applications from for the post of two new executive directors (EDs) have stirred up discontent and raised issues about the practice of bringing in outsiders, either or contract or on deputation from other government services. 
 
At inception, SEBI had no option but to bring in officials on deputation from various government cadres, since it needed persons with experience in investigation, enforcement, law and administration. Since SEBI quickly grew into a powerful regulator and offered better pay and perks, it because an attractive posting and career move for officers in government investigation services and for lawyers. Over the past decade, SEBI chairmen had begun to prefer EDs on contract, since they owed allegiance and loyalty only to the chairman. This raised a lot of concerns, especially, when it spliced to the legal departments. 
 
 
Indeed, SEBI' employee service regulations also provide for the appointment of external candidates, but only when no suitable internal candidates are available. The advertisement suggests that SEBI is again looking for outside talent. 
There are 10 posts of ED in SEBI, including one for full time chief vigilance officer (CVO). Over the years, sustained efforts by the employee association has brought some balance and ensured a few internal promotions to the post of ED as well as Whole Time Members (WTMs). 
 
In a letter to SEBI chairman, the SEBI Employees Association (SEA), says, "While specialisation has been recognised till the level of chief general manager (CGM) in SEBI, unfortunately, at ED level, the regulations do not formally recognise this specialisation, in terms of qualifications or stream-wise specialisation. This, along with failure to recognise internal experience and expertise, could potentially lead to less than appropriate appointments."
 
The Schedule to Regulation 6(4)(b) restricts number of EDs to be appointed internally at 75%. This means, out of the 10, seven would be selected from SEBI's internal employees while three, including the CVO should be hired from outside. Earlier, this was 50:50, but current SEBI chairman Ajay Tyagi, to his credit, has ensured that ratio of internal to external candidates is 75:25. 
 
However, at present, there are three ED in SEBI, who are outsiders. Out of these three outsiders, two are on deputation, while one is appointed on a contract basis. Those on deputation, include one from the income tax (I-T) department and the other, who is the CVO, belongs to Indian Ordinance Factory Services (IOFS). Terms for both these posts of ED are ending in October and November this year.
 
The EDs in SEBI at present are S Ravindran, Nagendraa Parakh, Amarjeet Singh, Anand R Baiwar, VS Sundaresan, SV Murali Dhar Rao, Sujit Prasad, and G Babita Rayudu. Arti Chhabra Srivastava from the IOFS cadre is the CVO of SEBI. 
 
Interestingly, SEBI has a large pool of 30 CGMs, many of whom have spent almost 25 years with the market regulator.  According to the employee association, their chance of promotion to the post of ED is likely to be impacted by looking for outsiders, when the need is to increase posts in line with the increased size and role of the organisation.
 
In the past there have also been instances of officials who came to SEBI on deputation as CGMs and were later elevated as ED. These include MS Ray, S Ramann and Gyan Bhushan, among others. 
 
The SEA points out that in 2000, SEBI’s staff strength was 400 and there were seven posts of EDs. "Today, SEBI has a staff strength of around 900, and yet there are only nine EDs. Even the hierarchy above EDs has also expanded to four whole time members (TMs), when in 2000, there was not a single WTM in SEBI. This points to the need for rationalising the number of the ED post based on increase in positions both below and above ED level," it added.  
 
"Before making any appointments of external candidates, availability of suitable internal candidates should be explored and only in case no internal candidates are found, should external appointments be considered," the SEBI Employees Association says, adding, "When considering internal candidates, the widest possible pool of eligible candidates should be considered so as to present the best possible internal options to the selection committee."
 
SEA says it is not opposed to external candidates per se. "But when experience shows that adequate number of suitable and well qualified internal candidates are available, as against non-availability of suitable external candidates, it is high time that this experience and reality was recognized and due recognition given to the expertise, experience, knowledge and long service of internal candidates," it added.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    amootha

    15 hours ago

    investors right come rform sebi circualr 32/97 where a library is a must with facilities mentioned in point 1 to 7 .but sebi never practices what it preaches .library is only must for swtock exchanges not at plavces where sebi has offices .but sebi can spend about 70 cores in slary over its executive directors but cannot spare a few crores whenre all sebi has its offices in india so thatinvestors cam make an informed choice .
    hope sebi will keep the library open till ten pm so that peeople after work can take advantage of the library facility
    some much to speak about hte std of ethics of whole time members or the sebi chairman who has been given a extension
    clearly step motherly treatment to investors

    amootha

    18 hours ago

    HARD TO BELIEVE THAT seBI SPENDSabout 70 crores on execituve directors alone every decade and yet sebi team of ED and other officers could not point out the listing obligations disclosure violations under sec 4 1 ,sec 4 2 of the sebi listing obligation disclosure regulations committed by Yes bank and finally other banks had to pump in more than ten thousand crores plus to fill the hole created in ranas tennure .
    on e thing is very clear as it appears to me sebi is clearly spending more time to see that it does not perform its regulatory functions and there by cause a loss in he financial markets .how sebi closed its eyes for all violations of NSE is equally stunning .
    you know that the entire team at sebi mumbai corporate office was not able ot detect the scam played nse includ ing VIkram limayee i n leaving no stone upturned in falsification of facts replied to sebi on enquiry in relation to settlement guarantee fund circualrs issued by nse .
    take the case of settlement guarantee fund circulars issued by nse in the period 2000 to 2005 ,sebi was not able to find that nse was the only organisation to modify a stayed circular and that too for the precise period between 2001 -2003 .hardly seventeen circulars in all sebi had to read to find out hte truth and scam played by nse
    for sebi what ever nse replies it becomes gospel truth .indian public must thank the highly eccentric former ed of sebi j n gupta who now runs a law advisory firm on securities was responsible in my view for all the scams in NSE and the margin exemption issue in 2000 to 2005 period which nibbled the growth of equity in capital markets

    SEBI Postpones Margin Rules Implementation by One Month
    Bringing some relief to stock brokers, the Securities and Exchange Board of India (SEBI) on Friday postponed the implementation of the new rules for upfront margin collection in the cash segment by a month.
     
    The norms will now come into effect from 1st September, instead of the previously scheduled 1st August.
     
    Further, the regulator has also eased the norms. It said in a circular that if stock brokers collect a minimum 20% upfront margin, then a penalty for short-collection or non-collection of margin shall not be applicable.
     
    "If TM/CM (trading member/clearing member) collects a minimum 20% upfront margin in lieu of VaR and ELM from the client, then penalty for short-collection/non-collection of margin shall not be applicable. However, it is reiterated that the Clearing Corporation shall continue to collect the upfront margin from the TM/CM based on VaR and ELM," it said.
     
    The penalty provision for short-collection or non-collection of upfront margin in the cash segment shall be implemented with effect from 1st September, the circular said.
     
    The trading community of late has raised concerns on the new guidelines, and the brokers said that there could be volume crunch apart from initial technical issues.
     
    In another decision, SEBI has permitted using digital signatures for authentication and certification of any filing and submission made to the stock exchanges till 31st December.
     
    The market regulator said that it has received a representation from the Institute of Company Secretaries of India (ICSI) stating that due to the COVID-19 pandemic and precautionary measures, company secretaries continue to face operational challenges in carrying out certification and authentication of documents in physical form.
     
    "The extension of SEBI to continue using digital signatures is definitely a way forward to ensure that we keep going with the aid of technology and facilitate a more hygienic and safe means of operation avoiding the need for physical interaction," Sonam Chandwani, managing partner at KS Legal & Associates, said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    parimalshah1

    2 weeks ago

    And Karvy has also changed name to KFin tech.
    And regulator is not bothered!!!

    parimalshah1

    2 weeks ago

    This margin changes are another bird brained idea to benefit large brokers at the cost of investors. This is another attempt to fleece investors and benefit big brokers.
    Karvy has gone scot free after fraudulent pledging of investors shares of 2000 crore rupees misusing PoA.
    When investor gives margin upfront to sell shares or transfers shares to sell the risk increases for investor if broker defaults.
    There is higher amount of money or shares available with the broker to misuse for overnight call money. And small investor who wants to sell shares because of need - from where will he get money to pay upfront margin? He will need to borrow money.
    The cure is worse than the illness.
    Pathetic regulator.
    Hope some legal minds go for PIL on behalf of small investors.
    May be Moneylife could take a lead.

    Needed a Powerful SEBI Chief, To Stop Markets from Regressing to the 1990s
    As the market watchdog gets ready for its 10th chairman (assuming the incumbent is not given another extension), we seem to be back to the scourge of stock brokers defaulting regularly and misappropriating investors’ money. The regulator, Securities and Exchange Board of India (SEBI), seems clueless about how to deal with it.
     
    We have been led to believe that these problems were buried in the previous century. But when supervision is replaced by committees, we get procedural solutions and new disclosure and reporting requirements that fail to address the problem. Enforcement and penalties cannot be replaced with a morass of red-tape that is easy to dodge or exploit.
     
    Ideally, the SEBI chairman, as an independent regulator, ought to be judged by his ability to keep markets safe and ought to make a televised presentation of his performance to the parliamentary standing committee on finance every year. 
     
    Unfortunately, parliamentary committees in India, although headed by an Opposition member, have turned into junkets and very few parliamentarians have interest in, or domain knowledge of, the committees they represent.
     
    The immediate consequence is that each SEBI chairman is a transitory bird, focused on appearing busy with development work, ‘managing’ the finance ministry and working for an extension. A reading of former chairman UK Sinha’s book on his years at SEBI provides the best possible insight into what the regulator considers his achievements after the second longest tenure of six years as SEBI chief. 
     
    Regulatory capture by the National Stock Exchange (NSE) started under CB Bhave, and the saga of slow, pointless and unending investigation (while constantly tinkering with reporting requirements), has continued under Ajay Tyagi as well. 
     
    SEBI is essentially a chairman-led organisation and, barring one or two, all the top appointees in the past decade have parachuted from other cadres with the responsibility to pass key orders, while also learning on the job. Many whole-time members come to SEBI in post-retirement jobs and have little interest in effecting systemic changes or tightening investigation, supervision and adjudication.  
     
    It is not as though SEBI officials are unaware of the problems or have not raised them internally. Here is something that was explained to me by a SEBI insider, in response to my charge about meandering investigations killing investor confidence which has been forcefully raised inside SEBI with no effect.
     
    Let me present just two orders by an adjudicating officer that cover 75 cases filed on SCORES (SEBI Complaints Redress System). In the first instance, SEBI’s Ahmedabad office closed 35 cases through a single order (Adjudication order No.AKD /AO-41-75 /2018-19) and 40 cases in the second order (Adjudication order No. AKD IAO-1-40/2018-19). They do not reflect the competence of the adjudicating officer, but the meaninglessness of the exercise itself. In both cases, the orders document the seemingly impressive and painstaking effort by SEBI officials in response to complaints on SCORES.  
     
    • They start by writing to each company against which there is an investor complaint, asking it to get registered on SEBI’s SCORES system to enable online complaint redressal. In effect, these are companies which didn't even meet the first requirement in the redress process. 
    • When the 35 companies failed to respond, each company was issued a carefully drafted show-cause notice (SCN). Remember, there is an official drafting and sending out a letter for each individual company. There is still no response.
    • In the interest of natural justice, SEBI then spends money on publishing advertisements in two newspapers with ‘nationwide circulation’ to call them for personal hearings. One is in an English daily and another in a regional newspaper where the person/ entity complained against was ‘last known to have resided’. This point is important because it suggests some effort to locate the address.
    • It is at this stage that an adjudication officer is appointed to examine the matter and pass orders for failure to register with SCORES and he makes a monumental finding. The “status of the companies on SEBI SCORES website is either ‘Compulsory Delisted’ or ‘Suspended’ from BSE and/or shown as listed on derecognized regional exchanges.”
    • It turns out that these companies were listed on the regional stock exchanges at Jaipur, Chennai, Madhya Pradesh, Vadodara, Delhi and Ahmedabad, which were all officially granted an exit by SEBI sometime between 2015 and 2018. 
    • Consequently, the adjudicating officer says, “looking at the entire gamut of evidence present and taking into account facts of the case” he has no choice but to ‘dispose’ the complaints. 
     
    This happened in December 2018; but there would be dozens of such orders, or variations of this silly waste of time, money and human resources.  Since both orders are under Section 15-1 of the SEBI Act, read with rule 5 of SEBI (procedure for holding inquiry and imposing penalties by adjudicating officer) rules, 1995, one presumes that this foolishness has been going on for over 15 years.
     
    SEBI claims to have cutting-edge software for market surveillance and real-time price manipulation (it is another matter that we only ever see evidence of this being used for post-facto investigations). But its officers cannot find information that would be easily available through a Google search if not from its own internal records. Did they not notice that the companies were suspended while looking for the address to decide on the regional newspaper for the advertisement? 
     
     
    At this rate, we will not have effective grievance redress even if thousands of officers are engaged in pointless and wasteful work, while their salaries are recovered from fees collected through intermediaries and, eventually, the investor. 
     
    With SEBI officials so busy with such meaningless work, is it any wonder that complaints are piling up, or being quietly closed by converting them into investigations and designating the complainant a ‘whistleblower’? 
     
    The consequence of an enforcement system that is clogged with senseless procedural work is the large number of broker defaults and the failure of SEBI as well as stock exchanges to anticipate issues and initiate preventive action. What is worse, every post-mortem only leads to more regulation and paperwork, as we have seen with corporate governance disclosures.
     
    SEBI has claimed, in a letter to the finance ministry seen by Moneylife, that it discovered “serious instances of misappropriation/ misuse of huge amounts of client’s securities by stock brokers such as Karvy Stock Broking Ltd., BMA Wealth Creators Ltd., Vrise Securities Pvt. Ltd., etc, during its own inspections.”  
     
    In fact, investors of BMA Wealth even blocked the entrance of SEBI in December 2019 to get the regulator to pay attention to their grievances.
     
    Under SEBI rules, investors can be paid from the investor protection fund of stock exchanges only when the brokerage firm is declared a defaulter. In February 2020, SEBI declared Vrise Securities, Kaynet Finance and BMA Wealth Creators as defaulters, but not Karvy Stock Broking, where the misappropriation is massive (over Rs2,000 crore) and chairman C Parthasarathy has repeatedly bought time by promising to bring in money. 
     
    As Moneylife has reported earlier, investors have also lost money in Amrapali Aadya Trading and Investments, KassaFinvest, Unicorn, Vasanti Securities, Royal International, Click2Trade, Allied Financial Services, Ficus Securities and Fairwealth. Some of the brokers, such as Modex, are also said to have diverted clients’ funds.
     
    These broker defaults appear to have depleted the investor protection fund of India’s largest stock exchange and here we hit upon another mystery. 
     
    The NSE, which has a near monopoly over the Indian capital market and accounts for over 90% of trading, has only Rs549 crore in its Investor Protection Fund Trust, as opposed to Rs725 crore with the Bombay Stock Exchange (BSE).  Since contributions to the fund are based on turnover, the NSE’s fund ought to be at least 15 to 20 times bigger than that of the BSE. But no data is available on NSE’s website. We have asked the NSE for details and will update this article if we receive a response. 
     
    Given that there are thousands of complaints against some of the big defaulting brokers, will the NSE’s investor protection fund be able to cover all claims even with the cap of Rs25 lakh per investor? 
     
    What happens if it does not? Where is the transparency? The promise of trade and settlement guarantees and a fall back on investor protection fund, were the key planks of India’s big leap to modern, automated, paperless trading. Thanks to mechanical and confused processes and lack of regulatory accountability, we seem to be regressing to the 1990s in some ways. These are points for the government to ponder, when it chooses a new SEBI chairman—a safe and efficient capital market is key to India’s economic revival. 
     
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    kvrao42004

    2 weeks ago

    As recent as May 2020, there was a technical glitch during trading hours and day traders lost heavily. Brokers(5Paisa and Zerodha) expressed helplessness and sent a standard reply to their clients. The glitch remained for more than 3 hours between 10.30am to 1.30 pm. No compensation. NSE kept quiet. Brokers also didn't bother. What for Investor Protection Fund? Of course in a systemic issue, the corpus of Rs.500 crores+ is a peanut. Such glitches have happened earlier also and no response from NSE.

    m.prabhu.shankar

    2 weeks ago

    Excellent Article

    prasanna

    2 weeks ago

    Sucheta Madam how do we change attitude of Neta, Babus, Officers and Bureaucrats? Unless these guys loose their money and go to SEBI, I don't think they will wake up and help the investor. Compulsorily their pay should be invested thru intermediaries in the markets which are governed SEBI. This may be an eye opener.

    hamungel

    2 weeks ago

    Excellent Article in your usual thorough manner.

    sundar_ramang

    2 weeks ago

    As usual Sucheta Dalal's articles are well researched, hard hitting and so very true..Hope GOI appoints REAL professionals (instead of accomodating Babus )and gives them a free hand to do their job..
    But am doubtful looking at the inability of the Government to retain talented RBI governors,Deputy Governors ,NITI Ayog vice chairman who were not babus

    ramyshar.ramakrishnan

    2 weeks ago

    "As the market watchdog gets ready for its 10th chairman (assuming the incumbent is not given another extension), we seem to be back to the scourge of stock brokers defaulting regularly and misappropriating investors’ money. The regulator, Securities and Exchange Board of India (SEBI), seems clueless about how to deal with it."

    "SEBI is essentially a chairman-led organisation and, barring one or two, all the top appointees in the past decade have parachuted from other cadres with the responsibility to pass key orders, while also learning on the job. Many whole-time members come to SEBI in post-retirement jobs and have little interest in effecting systemic changes or tightening investigation, supervision and adjudication"

    my comments:


    Have you ever seen a Giant size Octopus squeezen through a test tube ? This is how SEBI and errant brokers get escape route for their Great Escape for Brokers in collusion with politicians, bereaucrats, brokers and their coteries. “People often say 'A picture is worth a thousand words. ' I believe the original quote was actually 'A picture is worth ten thousand words' as stated by Fred R. Barnard, of Printers' Ink, 10 March 1927. " I say a 10000 such videos" Watch and see the modus operandi of a Great Giant Octopus escapade through a test tube: watch following youtube link video

    https://youtu.be/LNvMgGpGrrs

    sumitha

    2 weeks ago

    I wish I could nominate Sucheta Dalal for the job!

    soundararajanmk

    2 weeks ago

    A lengthy painstaking and elaborate exercise; we, investors are perplexed on going through this and are very much afraid of protection of our hard earned money locked up in the stock market as retail long term investors. Why the GOI is not serious on this issue, lest they should at least close down day trading of stock market as a last resort.

    Meenal Mamdani

    2 weeks ago

    Excellent article pointing to the lack of will at the highest echelons of govt, by which we mean Mr Modi and his coterie.
    Modi had been loudly criticizing the previous govt for corruption. Not putting a capable official in charge of an important regulatory body such as SEBI is also corruption on a mega scale.
    What does the ruling govt have to say about this shocking lack of due diligence in supervision of financial markets? Is the BJP incapable to holding the big honchos' feet to the fire?

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone