The Securities and Exchange Board of India (Sebi) will soon come out with new corporate governance rules for the listed entities in the country. Sebi chairman UK Sinha said on Saturday that the board will take up the proposals in its next board meeting and will announce them after board approval.
“Our consultation is over and very soon, hopefully in our next board meeting we would be taking the proposals and after the Sebi board has taken a decision, we will announce the detailed proposals,” said Sinha on Saturday while speaking to reporters on the sidelines of the 7th Convention of the Association of National Exchanges Members of India in New Delhi.
While Sebi had put out a discussion paper in January 2013, it was waiting for the Companies Bill to get passed before coming out with the new rules. The capital markets regulator touched upon the need for investors to be careful about the corporate governance norms followed by companies.
He said that the regulator found out various examples where buy backs were being done to support the price of the stock and also it had examples of misuse of merger and amalgamation procedures — especially with regard to related party transaction.
Speaking at the conference Sinha stressed upon the need to build investors trust in the market so as to broaden and deepen the market and to increase retail participation.
While Chitra Ramkrishna, MD and CEO of NSE called for the need to get pension money into the capital markets, Sinha said that the EPFO trustees do not have faith in the market even though one shows them a compounded annual growth rate of 17 per cent achieved over the last 10 years by the market. “If you go and talk to the EPFO trustees, they do not have faith in the market,” said Sinha. “There is a finance ministry notification that 15 per cent can be invested in the capital markets but inspite of that we have not been able to generate that sort of trust and therefore a lot of work has to be done.”
While he called for enhancing the trust factor he also emphasised on the need to have certainty of laws and rules and regulations which is of utmost importance for foreign investors who are looking for certainty of rules and regulations. JD Seelam, minister of state for finance, also touched upon the need to simplify tax laws and to take measures that can instil confidence among investors.
Sinha, however, said that in order to get the trust of retail investors, all stakeholders—intermediaries, stock exchanges and even the corporates listed on the exchanges will have to do show it through their behavior. Referring to the NSEL scam, Sinha said “Each such episode takes our market backwards by 10 years.”
He said that Sebi will take steps to ensure that investors have faith and is working towards generating long term confidence in the market. “We have to respond to the needs of the society and we have to be guided by long term goals,” he said.