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'Sebi chairman's job is a thankless one'

At the first floor office of Devendra Raj Mehta, chairman of the Securities and Exchange Board of India in the heart of Mumbai's central business area, hordes of visitors are waiting to see him. A hearing is on in his room and Sebi officials stand outside his door waiting for a chance to pop in and gain the boss' ear.

Mehta, 65, is running late with his appointments. Finally, over an hour behind schedule, he calls in the Business Standard team. The 6-feet-1-inch-Sebi chairman apologises - and rides his hobby horse. He passionately talks of the trust, the Bhagvan Mahavir Viklan Sahayata Samiti, that's involved with the Jaipur foot.

Mehta is also disturbed by the accusation that the regulator twiddled its thumbs last year while brokers wreaked mayhem in the markets.

In an interview to Janaki Krishnan and Tamal Bandyopadhyay, Mehta defends his Sebi legacy- and rues his decision to seek an extension two years ago. Excerpts:

Is there anything Sebi could have done last year before the market crashed?

The markets went up ... and then down. It happened with all other international markets. Nobody said that there was a scam there. Most of the problems in the market stem from the fact that corporations have become very powerful. They are powerful in terms of their sheer size. The moment you start taking some action, they jump upon you.

The president of the Federation of Indian Chambers of Commerce & Industry openly criticised Sebi. Have you seen this in any part of the world? Can any company in the UK openly criticise the FSA? In the US, can anyone take on the Securities & Exchange Commission? These things happen here. I understand that corporations have to grow, but some of them are not used to the culture of compliance.

Could Sebi have done much more to contain Ketan Parekh?

We asked the exchanges at least four times to report to us any concentration, circular trading, any other unusual events and whether margins had been evaded. All four times the National Stock Exchange (NSE) said no. Then, we got a complaint about six companies and we asked the exchanges to report back. The Bombay Stock Exchange did not report to us, but we have their internal report. NSE reported that there was no concentration, no circular trading and no linkage between promoters and brokers. I can understand it if you have a problem with the BSE. But what about NSE? it is a well-managed exchange, the reputation of the people is excellent. Then what went wrong?

So the exchanges misinformed you.

In the US, the SEC does not get into surveillance of exchanges. Why, then, do you have different yardsticks for us? I'm not saying that since the US is not doing it we also should not do it. Every month we used to have discussions to which all major exchanges were invited.

We used to regularly check the situation. You compare the SEC with Sebi. But we don't have the SEC's powers. Can we call for documents? Can we pass cease and desist orders? Even if company promoters are found guilty, what action can we take except prosecution? And prosecution can drag on for five years.

So you are frustrated and angry...

Please don't convey the impression that I'm frustrated and bitter. There has been a lot of satisfaction too. The Indian markets have emerged as one of the most modern, safe and efficient markets because of the measures Sebi has taken.

We forced brokers to computerise. We have 100 per cent on-line trading. Even the New York Stock Exchange does not. We introduced dematerialisation over three years. The US took 10 years or even more to do so. We introduced the T+5 settlement system. We introduced corporate governance in companies. For 50 years we were talking about accounting norms.

Who took the initiative in this? Sebi did, though, of course, the Institute of Chartered Accountants of India was very co-operative.

Today our accounting methods are comparable to international standards. And the kind of disclosures available to investors today is enormous. How many countries have quarterly results declared? Very few. India is one of them. Has the Indian market been closed for a single day? No overseas stock exchange can claim that it has not been shut.

Was there any pressure on you to close the market on September 11 or 12?

Though there was tremendous pressure, at 8 am on September 12, I called the NSE and BSE and told them that the markets will remain open as we don't want to send panic signals. We could do that because of the strength of the system.

You were said to be opposed to rolling settlement.

I never opposed the rolling settlement system. The issue was how to manage the change, not the change itself. We first decided to introduce rolling settlement on a voluntary basis with 15 scrips.

We thought that the financial institutions, mutual funds and others would come forward and create a market. The critics argued that we had included only the bad scrips. We had taken 15 of the top B scrips and this was decided by a committee and not by me.

Then we made it compulsory and extended it to some 163 scrips. One day some of the critics came and complimented on increasing the number to 163 scrips. Some of these people are so impatient and theoretical because they don't have to be accountable.

We thought that, as in the case of demat, we should introduce rolling settlements in phases. They wanted it to be introduced right from day one.

Now, how do you introduce rolling settlements unless you have demat, electronic transfer of funds and other measures? The point I am making is we never opposed changes. This was a canard

Which was your best job and which was your worst one?

The job I liked the best was when I was Collector at Jaisalmer. The worst period I would say has been this last year at Sebi. I wish I had quit earlier but I had to stay on because of the Joint Parliamentary Committee. One of the biggest mistakes I made in my life is that I sought an extension.

Do you see a case for a super regulator in India?

The concept of a super-regulator may not work here. It's too big a country. But there is a need to reduce the number of agencies. Nobody wants to share power. Whenever there is a problem, Sebi is held responsible. When sanction has to be given, somebody else does it.

What has been your greatest failure?

We have not been able to launch a good educational programme for investors. We should have told investors clearly that the equities are risky. When I introduced circuit breakers, editorials accused me of meddling with the markets. They said that here was a bureaucrat who couldn't give up control.

What advice do you have for your successor?

Many of the suggestions we made to the JPC must be pursued. The system can't be changed. If a broker distributes his business through a number of other brokers, what can we do? The point to appreciate is that broking is one part.

The promoter and the company is the other part. What power does Sebi have to deal with them? I issued a directive under Section 11B in the Sterlite case and that was overturned by the Securities Appellate Tribunal. What can I do in this case, tell me?

Are you saying that the Sebi chairman's job is a thankless job?

To a large extent it is. And that's why I'm feeling relaxed now that time has come to leave.

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