MUMBAI: The Securities and Exchange Board of India (SEBI), stung by the controversy created by the alleged failure of the previous chief from acting in conflicts of interests, the new SEBI chairman Tuhin Kanta Pandey, at the first board meeting, has constituted a high level committee to review and fortify the public disclosure mechanism for its top officials so that there is no conflict of interest issues.
Indirectly admitting that there is trust deficit within SEBI and also on SEBI among the stakeholders following the alleged failures of his predecessor Madhabi Puri Buch, Panda said “...there is a need to build trust in the institutions and by the stakeholders and the setting up of the high level panel will go a long way in building that.”
Answering repeated questions from reporters at his maiden press conference— he assumed office on March 1– following the board meeting on Monday evening, he said “People inside or outside the organisation need to know that things are fine... if you don't have a framework how do you know what needs to be disclosed, how it needs to be disclosed.. .also where the complaints should be raised etc.”
On the timing of constructing the panel, he said, “why not now? Well you can always ask the question. You know, there was a certain trust that needs to be built up, so to say. And secondly, you know, people in both in our organization and outside, they need to be clear that things are fine, and there is no such thing, there is no tendency to hide, and we don't want to do that.
“But we need to have a framework. The point is, if you don't have a framework, how do you know which one will be disclosed? How will it be disclosed? How do you make a complaint? Where does it go? How does it get mitigated? It's important that we look at these issues and what are the best practices around it.”
To another question, Panda also said the proposed committee whose members or the terms of reference have not been made public but would be done at the earliest according to the chairman, will also frame norms for making recusals by board members and other senior officials from a probe public, which is not not currently done.
The objective of the high-level committee is to comprehensively review and make recommendations for enhancing the existing framework for managing conflict of interest, disclosures and related matters towards ensuring the high standard of transparency, accountability and ethical conduct of members and officials of the board,” said the chairman.
Panda said the proposed panel will review the conflict of interest and disclosures related to the property, investments, and liabilities of board members and officials. And the panel is expected to submit its recommendation within three months from the date of the constitution. The recommendations will then be placed in front of the board of directors for consideration, the chairman said.
The committee will comprise distinguished personnel and experts with relevant backgrounds and experience in constitutional or statutory or regulatory bodies, government/ public sector, private sector and academia.
Jyoti Prakash Gadia of merchant banking firm Resurgent India said the plan is a very timely step towards strengthening the governance standards and efficacy of Sebi and will have far reaching impact on the financial world,their personal conduct needs to be impeccable without any bias or favour for the entities being dealt with by the organisation they are working for.
Foreign funds threshold doubled for disclosures to Rs 50,000 crore
The SEBI also doubled the disclosure threshold of foreign funds for investments in domestic company assets to Rs 50,000 crore from Rs 25,000 crore, saying there is a real need for cash and we are the regulator of the market has to also look at the cost of regulation.
“Trading volume in the cash segment has more than doubled between FY23 and FY25 from 58, 000 crow to Rs 1.28 trillion. In light of this, the board has approved a proposal to increase the applicable threshold from the present Re 25,000 crore to Rs 50,000 crore,” said chairman Pandey.
SEBI move is aimed at changing the stock market dynamics without altering the concentration criteria.
As of March 24, certain FPIs with assets under management of more than Rs 25,000 crore are required to provide granular details of all their investors or stakeholders on a look-through basis. However SEBI could not answer how many FPIs would be impacted or come out the reporting requirements following the changes.
“Thus, FPIs holding more than ₹50,000 crore in equity AUM in the Indian markets will now be required to make additional disclosures,” he said .
Sebi had in August 2023 made it mandatory for FPIs holding more than ₹25,000 crore worth of assets under management in the domestic markets to disclose details of all entities holding any ownership, economic interest, or control.
This August 2023 circular was introduced to guard against any potential circumvention of Press Note-3 rules, which require all investments from countries that share a land border with India to be cleared by the Union government.
Pandey clarified that the disclosure requirement remained unchanged for foreign portfolio investors holding more than 50% of their equity assets under management here.