Why in news?
Expert panel report of SEBI on fair market conduct has been released.
What is the report about?
- The Securities Exchange Board of India (SEBI) has been anointed with sweeping powers to haul up offenders.
- But this has clearly failed to have a deterrent effect on the conduct of market players, with scams, frauds and accounting manipulations cropping up all too frequently at India Inc.
- In this regard SEBI-appointed TK Viswanathan committee on fair market conduct has released its report.
What are the highlights of the committee report?
- The report has reviewed key securities market laws in light of recent cases and contemporary practices, to suggest changes that can make them watertight.
- The committee seeks to empower SEBI to act directly against a listed company, its directors and auditors where its books of accounts are falsified.
- Rather than rely on provisions of the Companies Act, the committee has sensibly recommended that the SEBI Act be amended to allow SEBI to prosecute entities manipulating accounts.
- The definition of fraudulent trades under the PFUTP rules has been widened to include front-running, orchestrated trades, circular trading and benchmark fixing.
- Recognising that staffing constraints at SEBI often lead to long delays in enforcement actions, the committee suggests a special fast-track process for cases involving marquee names.
- Whistle-blowers play a key role in alerting regulators to malpractice and the report recommends that SEBI, rather than the Central Government, be empowered to grant immunity to whistle-blowers.
What is the way forward?
- The report's recommendations for SEBI has proved a far more proactive regulator than the Ministry of Corporate Affairs.
- Few recommendations of the report could result in regulatory overreach.
- This would include the suggestion to characterise trading by market players in excess of their ‘verifiable financial resources’ as fraud.
- The other is granting SEBI the powers to intercept calls.
- Overall, most of the committee’s recommendations are worth taking forward, and if implemented, can significantly raise the bar on the conduct of market players.
- However, the sheer number of gaps flagged in the report also highlights the need for updates to securities market laws at more frequent intervals.
Source: Business Line
