Looking ahead in Looking ahead in Regulation and Regulation and

SupervisionSupervision

G. N. BajpaiG. N. BajpaiChairmanChairmanSecurities and Exchange Board of IndiaSecurities and Exchange Board of India

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RegulationsRegulations

A regulator’s focus should not be on the A regulator’s focus should not be on the

regulations but on the Development of the regulations but on the Development of the

Market. Regulations just happen to be the Market. Regulations just happen to be the

incidental to the development. incidental to the development.

National mandate to SEBI is “Development and National mandate to SEBI is “Development and

Regulation of the Securities Market”.Regulation of the Securities Market”.

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RegulationsRegulations

Business environment is changing faster than Business environment is changing faster than

ever before. In this dynamically changing business ever before. In this dynamically changing business

environment, Regulations should be enterprising, environment, Regulations should be enterprising,

forward looking and evolutionary in nature. We forward looking and evolutionary in nature. We

can not shoot a moving target with a static gun can not shoot a moving target with a static gun

position.position.

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RegulationsRegulations

Regulatory approach should undergo a paradigm Regulatory approach should undergo a paradigm

shift, transiting from being enforcement oriented, shift, transiting from being enforcement oriented,

reactive, adversarial, incident driven and hard to reactive, adversarial, incident driven and hard to

compliance and partnership oriented, preventive, compliance and partnership oriented, preventive,

problem solving and soft.problem solving and soft.

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RegulationsRegulations

Regulations should define the broad framework/ Regulations should define the broad framework/

parameters for the game. Within that framework, parameters for the game. Within that framework,

Market Participants should be allowed to operate Market Participants should be allowed to operate

without intervention. Having defined the rules for without intervention. Having defined the rules for

the game, sight of the regulator should move from the game, sight of the regulator should move from

risk orientation to risk specific tactical choices – risk orientation to risk specific tactical choices –

tools selection, best time intervention and tools selection, best time intervention and

regulatory style to fit audienceregulatory style to fit audience..

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RegulationsRegulationsTraditional business models are gone. Industry is Traditional business models are gone. Industry is

an obscure word. Today, the world is talking about an obscure word. Today, the world is talking about

the convergence of the so called industries the convergence of the so called industries

resulting in the “opportunity zones without resulting in the “opportunity zones without

boundaries”. This convergence of the business boundaries”. This convergence of the business

poses substantial challenges to the regulators. poses substantial challenges to the regulators.

They need to co-operate at the level more than They need to co-operate at the level more than

ever before and strike an intelligent balance ever before and strike an intelligent balance

between the safety of the market and the creative between the safety of the market and the creative

initiatives of the market participants. initiatives of the market participants.

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RegulationsRegulations

Regulators should focus on becoming:Regulators should focus on becoming:

An innovator An innovator

A facilitator A facilitator

A confidence builderA confidence builder

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Regulations at SEBIRegulations at SEBI

Driven by the aforesaid philosophy, SEBI aims at Driven by the aforesaid philosophy, SEBI aims at

making: making:

““Indian Securities Market truly world class, Indian Securities Market truly world class,

competitive, transparent and efficient.competitive, transparent and efficient.

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Regulations at SEBIRegulations at SEBI

To accomplish our aim, we have structured an To accomplish our aim, we have structured an

ambitious Strategic Action Plan, which revolves ambitious Strategic Action Plan, which revolves

around the four spheres: around the four spheres:

INVESTORS (CONSUMERS) ,INVESTORS (CONSUMERS) , FIRMS (CORPORATE),FIRMS (CORPORATE), FINANCIAL MARKETS FINANCIAL MARKETS

(EXCHANGES, INTERMEDIARIES), AND (EXCHANGES, INTERMEDIARIES), AND REGULATORY REGIME.REGULATORY REGIME.

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Strategic dimensions of the Strategic dimensions of the RegulationsRegulations

Corporates Investors

Regulatory Regime

Exchanges and

Intermediaries

SAP

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InvestorsInvestorsObjective- Investors are enabled to make informed Objective- Investors are enabled to make informed choices and decisions and achieve fair deals in choices and decisions and achieve fair deals in their financial dealings.their financial dealings.Initiatives:Initiatives:

The launch of EDIFAR.The launch of EDIFAR. Strengthening DisclosuresStrengthening Disclosures Benchmarking for the Mutual Funds schemesBenchmarking for the Mutual Funds schemes

(both equity and debt). (both equity and debt). Valuation norms for the unlisted scrips, in the Mutual Valuation norms for the unlisted scrips, in the Mutual

Funds’ portfolios.Funds’ portfolios. Rationalization of the DP charges.Rationalization of the DP charges. Launching nation-wide Securities markets awareness Launching nation-wide Securities markets awareness

and Investor Education campaign.and Investor Education campaign.

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CorporatesCorporatesObjective - Regulated firms and their senior management Objective - Regulated firms and their senior management understand and meet their regulatory obligations.understand and meet their regulatory obligations.

Initiatives:Initiatives:

Institutionalised feedback mechanism between regulator Institutionalised feedback mechanism between regulator and regulatees and regulatees

New Insider Trading Regulations stipulating code of New Insider Trading Regulations stipulating code of conduct for listed entities and regulated firms. conduct for listed entities and regulated firms.

Strengthening of corporate governanceStrengthening of corporate governance

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Markets and intermediariesMarkets and intermediaries

Objective - Consumers and other participants have Objective - Consumers and other participants have confidence that markets are efficient, orderly and confidence that markets are efficient, orderly and clean. clean.

Initiatives:Initiatives: Introduction of derivativesIntroduction of derivatives Introduction of T + 3 Rolling settlement Introduction of T + 3 Rolling settlement Demutalization and corporatization of the exchangesDemutalization and corporatization of the exchanges Margin tradingMargin trading Securities Lending and borrowingSecurities Lending and borrowing New products in derivatives marketNew products in derivatives market Development of the retail debt market.Development of the retail debt market.

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Regulatory regimeRegulatory regimeObjective - An appropriate, proportionate and effective Objective - An appropriate, proportionate and effective regulatory regime is established in which all the regulatory regime is established in which all the ‘stakeholders’ have confidence.‘stakeholders’ have confidence.

Initiatives:Initiatives: SAT and Chairman’s orders being posted on web-siteSAT and Chairman’s orders being posted on web-site Consultative process before framing Regulations Consultative process before framing Regulations Speeded up Regulatory actions Speeded up Regulatory actions Review of various regulationsReview of various regulations Setting up of central listing authority (CLA)Setting up of central listing authority (CLA) Strengthening regulatory transparencyStrengthening regulatory transparency Re-engineering of systems and processesRe-engineering of systems and processes

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Regulatory reformsRegulatory reformsRegulatory reforms will focus on:Regulatory reforms will focus on:

Effects/impacts of various initiatives and Effects/impacts of various initiatives and results.results.

Risk control, problem solving and compliance Risk control, problem solving and compliance management.management.

Collaborative partnership with various Collaborative partnership with various stakeholders in the market, for regulations stakeholders in the market, for regulations management.management.

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Concluding remarkConcluding remark

I am only half joking when I suggest that (the author) I am only half joking when I suggest that (the author) ought to put a warning box somewhere in (here) that ought to put a warning box somewhere in (here) that says something like:says something like:

Warning: Trying these methods is more difficult than Warning: Trying these methods is more difficult than you can imagine. You must really be desperate to you can imagine. You must really be desperate to have an impact, or be totally dissatisfied with your have an impact, or be totally dissatisfied with your program’s status quo to make this undertaking program’s status quo to make this undertaking worthwhile”worthwhile”

Joe DearJoe Dear

Thank YouThank You