Corporates must be on 'right side', says Sebi chief

Adds they should access the market to grow

“Some corporates, ideally, should not have fallen into this category or this trap. We have discovered that this (illegal activity) is happening due to lack of focus... I’d like corporates in India to be on the right side of Sebi,” Sebi Chairman, U K Sinha, said addressing Assocham, clarifying that what he meant was in relation to market manipulation, insider trading and so on.

Corporates should definitely access the markets to grow, but should not come to the “adverse” notice of Sebi, he added, insisting that Sebi is more interested in fulfilling its mandated job of developing the market rather than playing the role of a vigilant watchdog.

Asking for extra caution by corporates in their internal systems, Sinha said promoters and top management “are not able to safeguard themselves against certain things which might be happening without their knowledge or without their support”. Discovery of documentary evidence and analysis done by Sebi recently prompted these remarks, he said.

Sebi is currently in the midst of setting-up a facility with the best of surveillance capabilities, Sinha said, adding that more than half of the work on it is complete and the entire facility will be operational in six months.

Speaking about the accounting and audit fraternity, the new chief said the regulator would take action if it finds any “collusion” between the audit firms and corporates while asking the latter to adhere to the highest standards of financial reporting.

Coming out in support of pension money being invested in the equity markets, Sinha said a working group’s recommendation of allowing trusts to invest up to 15 per cent is yet to be approved and added that Sebi has taken it up with the government at the “appropriate level”.

Sebi will focus towards deepening the markets going forward, Sinha said, pointing out to certain concerns like low participation of domestic institutions, skewed geographical growth and failure to attract pension funds to the market.

Batting for retail investors, Sinha said that current know your customer (KYC) requirements are not harmonious for investors and the contracts they enter into while purchasing shares also need a "major overhaul". A working group has been constituted to remove "bottlenecks and discrepancies", he said.