“We want to make examples of big companies,” Sebi Chairman M Damodaran, said at a Merrill Lynch & Co. conference in New York.

Tough posture
“We believe that those of you who invest in our markets need to know that the companies that you are invested in are managing your money well, putting it to stated good uses rather than unstated not-so-good uses. We want that message to get across.”

The regulator’s move comes as overseas investors have pumped a record amount of cash into India’s stock market, driving it to an all-time high. Net equity purchases by overseas investors this year total $11.6 billion as of September 26, compared with the previous high of $10.7 billion set in 2005.

Biggest, Not Best
The regulator chose to push for better compliance by pursuing and sending notices to the “biggest and perhaps not the best” companies, rather than start a drive across thousands listed on the exchanges, Mr Damodaran said. He declined to name the companies, telling investors in the US that they would soon get the information through disclosures from the companies that got the notices for not complying with the mandated corporate governance framework. He also didn’t elaborate on the infractions.

The crackdown was prompted by criticism that while the agency “had barked long enough” about the regulations, put in place a long time ago, it was showing an “unwillingness to bite,” he said.

“We would like to see IDRs become a fact of life in the not-too-distant future,” Mr Damodaran said at the conference, which was on “Investing in India’s Most Promising Sectors.” “If things work out, we might be the first regulator to put in sunset clauses,” so that regulations don’t outlive their purpose, Mr Damodaran said.