Such a person, to whom the syndrome of Caesar’s wife applies far more than lesser mortals, must go beyond the institution’s codes to dispel shadows of suspicion. But that job would be tougher if codes are inadequate and do not capture the complexities of the business landscape and the myriad conflicts of interest. And, if the person in question is a proverbial outsider, a taxing, mercurial boss who is in a hurry to push through sweeping changes, the journey could be like walking through a minefield.
Madhabi Puri Buch, who is now in a storm in a Congress teacup, was unwittingly treading that path as she enforced onerous regulations, which some felt were unrealistic. Nonetheless, market participants sensed that they could not take the capital markets regulator lightly – irrespective of the perception that Sebi had let Adani Group escape with a mere rap on the knuckles.
Buch is the first person from the private sector to head Sebi, and may well be the last one if New Delhi ignores the allegations against her, no matter how unsubstantiated and frivolous these may be.
No government, which values inflows for balance of payments and equity mobilisation, can leave any room for anyone – be it a desperate Opposition or a frustrated industrialist – to point a finger at the Sebi chief.
It’s not enough for the chair and Sebi board members to simply disclose stock transactions within 15 days or abide by a code that they shall not deal in listed securities based on ‘unpublished price sensitive information’. Indeed, there should be unambiguous rules to address and minimise questions on other possible conflicts of interest.It’s inevitable that a banker or corporate CEO who leads Sebi would run into conflicts due to his earlier association with listed entities and business decisions taken during his days in the private sector. Should he, then, be allowed as Sebi chairman to freely exercise his employee stock options vested during his previous stint? How should one go about it?Ideally, a person should either sell his stock portfolio and exercise the options before assuming the office, or transfer the shares, along with the options, to a third-party manager who has the complete discretion when and at what price to exercise the options. It could be further spelt out whether the person can borrow to exercise the options and sell some of the acquired stocks to repay the loan.
But that may not be all to prevent someone from blowing a whistle. The dos and don’ts of other relationships should be laid down: possible earnings from properties rented out to business groups with listed companies; shareholdings and family links with unlisted outfits earning advisory fee from listed clients – even if such advice has little to do with the securities market.
Such rules (there could be more) are imperative if GoI does not want to shut the doors of Sebi chairmanship to credible names from the private sector who may bring in deeper insights and understanding on the functioning of financial markets. Since the US short-seller Hindenburg’s allegations that Sebi went soft on the Adani Group, chances of the top Sebi job being offered to another private sector CEO in future have become slimmer by the day.
It’s now an obvious guess that the IAS lobby would try to reclaim the post it had traditionally held, and which, much to their surprise, went to an investment banker. It’s irrelevant whether Buch will get another term. Probably she won’t. Maybe the job will go to a bureaucrat who’s tasted blood.
But it would be a hasty, short-sighted move to put a lid on controversies by appointing an IAS without changing the regulations that could help in dealing with issues of conflicts in future. As markets open and become more complex, the job should not be out of bounds for deserving names from the larger world of banking and markets. It would be a pity if the battle for Sebi is already lost to the dining hall pals of the academy in Mussoorie.
sugata.ghosh@timesofindia.com
