Regulators who do their jobs effectively are seldom popular with their constituents. Therefore, it is necessary to evaluate Madhabi Puri Buch’s term as the Chairperson of the Securities Exchange Board of India (SEBI) from the lens of what she did for investors and markets at large, rather than go by what market participants and intermediaries say.
During Buch’s tenure, there was little that went on in capital markets that escaped SEBI’s notice — whether it was untrammelled punting on derivatives and SMEs, finfluencers peddling interested advice on social media or unregulated platforms selling complex products such as covered bonds and fractional real estate to retail folk. SEBI wrote new regulations, from scratch for online bond platforms and SM REITs, and regulated entities were barred from financial dealings with unregistered influencers. The regulator raised the bar for SME IPOs by enhancing minimum investment limits, mandating a profitability record for issuers and barring them from certain end-uses of funds. One of its most unpopular, but praiseworthy, moves was the decision to cool the red-hot derivatives market that was turning lethal for retail investors.
SEBI under Buch was not tardy with enforcement actions either, passing over 600 orders against stock manipulators, dubious advisors, brokers who diverted client money, and front-runners within domestic institutions. These moves did much to keep the capital markets accident-free during euphoric times. Towards the latter part of her tenure, Buch focused on SEBI’s market development role by flagging off initiatives such as small SIPs and Specialised Investment Funds. SEBI’s main shortcoming under Buch was its tendency to be over-zealous. While the regulator was data-driven and diligently consulted stakeholders in proposing new rules, regulatory changes were mooted at breakneck speed, giving participants little time to adjust. SEBI also went right ahead with T+0 settlement despite reasonable voices of opposition from the market. Regulatory tweaks for the advisory, broking and mutual fund industries were proposed in a piecemeal fashion. SEBI continued to face a rather high incidence of landmark orders being watered down by Securities Appellate Tribunal — the Karvy stock broking order, Brickworks ratings order and NSE colocation order being cases in point.
The barrage of allegations levelled by short-seller Hindenburg against the Chairperson lacked substance but managed to hog the headlines and tar the regulator’s reputation. This could have been entirely avoided had the Centre, which appoints the SEBI Chairperson, stepped in to clear the air. Scalded by the Hindenburg episode, it does appear that the Centre has now given up on the experiment of appointing a market professional at the helm of SEBI, which is a pity. With comprehensive regulations now in place for most segments of the market , incoming Chairman Tuhin Kanta Pandey can perhaps focus on enforcement actions and building out the legal and investigative capabilities of SEBI.