Taking a tough stand against the ongoing tumult, Securities and Exchange Board of India (SEBI) chairman CB Bhave said the investigation into incidents of price-rigging carried out by his agency and investigations by other government departments are cleaning up the rot in the market that would protect investors.
"Investors should be happy that the market is getting cleaned up," Bhave said. "There is no need for investors to be nervous. Investors should be happy that wrong-doers are caught," Bhave stated speaking at the 41st A.D Shroff annual public lecture on ‘Regulation and Development-Conflict’ held at the IMC on Friday.
Investor confidence in the markets has been ruffled in the past few weeks with the Central Bureau of Investigation arresting some bank officials on charges of corruption, including the Chief Executive of LIC Housing Finance. SEBI had charged promoters and brokers of rigging stock prices.
Bhave made a strong pitch for financial autonomy of regulatory bodies, saying interfering with it will ‘jeopardise’ their independence.
“If regulators have to depend on the Executive for release of funds, the question of independent behaviour by the regulators will be jeopardised. It is necessary to carefully consider the pros and cons of taking away the financial autonomy from the regulators,” the SEBI chairman said.
Bhave was referring to a reported plan by the government to make the regulators deposit their revenues into the Consolidated Fund of India.
“Currently there is a line of thought that regulatory authorities should not be allowed to have funds of their own. These funds should be merged with the Consolidated Fund of India,” Bhave said.
Stating that regulatory autonomy vis-à-vis the Executive is not only necessary but also essential, he pointed out that in the case of SEBI and insurance watchdog Insurance Regulatory And Development Authority (IRDA), financial autonomy was built into the legislation by way of providing that such authorities will establish a separate fund into which the fees paid by market intermediaries will be credited.
He also highlighted that there needs to be a review of the existing laws regarding the process of appointments and removal of members of the regulatory bodies.
"Regulators do not enjoy protection in terms of the conditions under which their service can be dismissed by the executive," he pointed out. However, he quickly added that though at SEBI, there has been no tradition of members getting removed midway.