Tags:
Journalism of Courage
Expressing concern over independent directors and audit committees not performing their roles satisfactorily, Securities and Exchange Board of India (Sebi) chairman Ajay Tyagi on Friday said that it was surprising when independent directors resign from a company’s board citing innocuous personal reasons and not pointing out the real problems that the company may be facing.
“Auditors’ committee is not working, independent directors are not independent and there is no stewardship code, then definitely there are serious issues… This a serious issue which is engaging the attention of Sebi. We will come out with more discussion soon,” he said while speaking at CII’s annual meeting.
He said corporate governance norms for market intermediaries should be much stronger than for listed companies. He also made a case for higher voting by institutional investors during board resolutions, rather than these entities behaving as passive investors.
Tyagi’s comments assume significance in the backdrop of the recent boardroom battle at the Tata group and the controversy regarding the differences between some promoters and the top management at Infosys. In January, Sebi had issued a ‘guidance note’ on board evaluation at listed firms. It emphasised that the role and function of chairperson in board evaluation needs to be laid out clearly in advance in order to achieve maximum benefit of the process.
Sebi is also planning more reforms in the mutual fund industry, trying to cut the listing time during IPOs and working to ensure that all forms of registration for the 21 market intermediaries are done only by July, he said. With the BSE Sensex crossing the 30,000-mark, Tyagi said the boom in Indian equities markets is based on strong economic fundamentals. “This is on the basis of strong macro fundamentals… in terms of GDP growth, in terms of inflation control, fiscal deficit, CAD control and commodity prices (being) low. It is based on strong fundamentals…it is not that much of bubble effect but something based on strong fundamentals,” he added.
On the upcoming initial public offer of the National Stock Exchange, he said this is likely to take a few more months as co-location issues need to be sorted out. NSE, which filed its draft papers with Sebi in December to raise over Rs 10,000 crore, is awaiting for the regulator’s go-ahead. “They (NSE) have come to conclusion and rightly so… that co-location issue needs to be sorted out before they go for IPO that will take some time… a few months. It (IPO) could be a few months (away), it is not happening immediately,” Tyagi said.
Co-location in market parlance refers to brokers locating their servers on the premises of the exchange. This reduces the time for an order and provides speed advantage over those who are farther away from the premises. The bourse is facing regulatory scrutiny for allegedly providing preferential access to some entities with respect to co-location facilities. Following complaints about co-location facility of the exchange, a Sebi-appointed committee had initiated an examination and found instances of breach of fair access norms by the exchange.
