On The Investment Highway: A Cautious Drive With SEBI

Five years since U K Sinha took charge of SEBI being the man at the helm of market affairs in India, controversies never left him alone. He faces his enemies at home and away–but he continues his work towards millions of investors. His decisions being the chairman of SEBI helped Indian markets to have a more transparent and clean system in place and few critical ones have helped him to earn some friends across the nation. Joydeep R Ray spends few hours in a hot sultry summer afternoon in SEBI Bhavan to conduct a dissection of Sinha’s five years at the helm of affairs.

The huge eight-storied concrete structure at Bandra Kurla Complex in suburban Mumbai looks no different than the neighbouring buildings, all housing operational hubs of various private sector entities and also government run enterprises. Gun-toting men in uniform ensured the author goes through stringent security checks and all probable threatening articles including an innocent cigarette lighter are snatched away by the security men before finally allowing him the much-awaited entry. Few steps closer to the front office, another round of security checks followed, this time carried out by men in safari-suits. The women in front office were well-intimated about the author’s scheduled appointment. Another round of due security formalities led to the elevator. Welcome to the headquarter of India’s stock markets’ regulator, SEBI Bhavan.

Appointment of the SEBI chief way back in 2011 was marred with controversies–so much so that the country’s apex court had to intervene and rule in favour of the former UTI boss’s appointment against petition filed seeking the intervention of the Court quashing appointment of U K Sinha as the top boss of the market watchdog. Controversies never lived at a distance from Sinha, a former Bihar cadre bureaucrat. But controversies could never stop him from doing the tough job efficiently for last five years and three months.

Even after being examined by Central Bureau of Investigation (CBI) in the sensational MCX-SX case in 2014, nothing could deter U K Sinha from working towards protection of millions of investors in India. Breaking all the convention, his term even after being extended once in 2014 by two years, this February he got another extension, this time for one year allowing him to work from his eighth-floor office of the SEBI Bhavan. Some called him as a man close to Bihar chief minister, Nitish Kumar, some even indicated his proximities with former union finance minister and now President of India, Pranab Mukherjee while a few braved to call him Narendra Modi’s blue-eyed son after the unexpected extension of his role as the SEBI chief this February. After he took over in 2011, senior lawyer and activist Prashant Bhushan alleged Sinha’s appointment as SEBI chairman would give undue advantage to Sahara Group headed by Subrata Roy–irony is Roy faced most of the SEBI actions for his alleged wrongdoings during the first term of Sinha. “So much so that he walked out of this building and shouted before the media saying he was not even offered a cup of tea when he was summoned at SEBI Bhavan. SEBI does not extend courtesies to someone who is a suspect, Roy is not a friend," said a senior SEBI official. Sinha’s role in handling Sahara case has now become an example of how far a market regulator can go to ensure protection of investors’ interests. “Contrary to popular belief that it has been more of an ego tussle between SEBI and Sahara, the market watchdog just played its role and rest has been done by the Supreme Court which reiterated justice for all. In spite of all the pressure tactics used by the multi-billion business group, SEBI did not deviate from its stand and acted unbiased," said a senior lawyer associated with the development. In fact, way back in March, 2013, SEBI had sought civil detention of three directors of Sahara Group including Subrata Roy acting against tremendous political pressure laid on this quasi-judicial body.

Some appreciations are also to be kept for the central government during all these years as most of the time relation between the union finance ministry and SEBI has remained friendly and warm. After Sinha took over in February, 2011, things got further smoothened due to his personal equations with the government in power. Interestingly, things remained in his favour even after a change of guard in the summer of 2014.

“Sinha’s only aim is to take the market regulator to a different level from here and ensure investors’ hard-earned money is safe when invested in various markets’ instruments. We are seeing a new SEBI under his leadership," he added, requesting anonymity. So what did Sinha do during his first and second tenure–he first detected the loopholes in the system, studied how better investors’ can be safeguarded, initiated work towards ensuring a more transparent and clean system be in place.

Dinesh Thakkar, chairman and managing director of Tradebulls Securities say, “One of the major highlights of U.K. Sinha’s achievement is shutting down entities doing money-raising activities from outside the regulatory framework and not in the interest of investors. Prime example is Sahara group. Under Sinha, Sebi became a pan-India organisation with local offices in 16 cities where previously it was focused only in stock market and on brokers. He also eased the Initial Public Offering (IPO) process and managed to revive mutual fund sector. In fact under U.K. Sinha, SEBI became strict against erring companies and its promoters; revamping corporate governance framework and insider trading regulations. Frameworks to regulate investor-facing professions such as research analysts and financial advisers were also put in place." Remarkable achievements indeed, one may wonder. But then what about the host of allegations levelled against him during last five years and the gravest one coming from a senior IAS officer and a former colleague of Sinha, K M Abraham. Interestingly, attempts made to throw murk at Sinha’s career in SEBI did not meet much success. Some call it professional jealousy leading to levelling wild charges against the SEBI chairman, some even find those as malicious. But one thing for sure–none of these could stop Sinha from doing what he does. “See it is very pertinent to take note of the fact that when you reach to such a high position there are bound to be personal attacks, but with rooted integrity and vision you can overcome the same. And especially if you are leading an institution like SEBI which is not only important in terms of being contributing to the economy but at the same time it is a very young, thus being strong personality can only add to your functioning. Let’s see you have to deal with the government, corporates, investors and other regulators and in that order not only you have to take the views of each stakeholder but also you have to ensure that the policies are not burdensome on any particular stakeholder but also facilitate the growth of the capital market, you must have a strong personality who has the ability to take the decisions and take onus of the things. In fact the tenure of U.K.Sinha has been full of challenges and SEBI in such times has travelled stronger. Last but not the least it is very rare for a regulator to get a reformist award and that to by the financial dailies," said Rishikesh Gagan Vyas, past chairman of Western India chapter of the ICSI.

So what are the biggest achievements of Sinha while operating out of this building since last five years, especially from the investors’ point of view–eIPO, carving out regulatory framework for market based financing of techno start-ups, putting strict guidelines for mutual fund entities, keeping market analysts under radar, SARAL account opening form for resident individuals, listing regulations, keeping hawk’s eye on insider trading complaints. “The list can be easily stretched further at any given time and every move initiated has either directly or indirectly benefited the investors. While doing so, SEBI has been making its best attempt also to ensure the corporate entities get their dues and do not feel hassled while being in action," said a SEBI official, working closely with Sinha. Sandeep Parekh, former Executive Director with SEBI who at times remained critical of certain steps taken by the regulator did not hestitate to praise SEBI’s role when it comes to SEBI’s steps to reduce IPO listing period. “It will reduce/limit the risks related to market volatility that may occur during a longer period. The proposal is to reduce the time period for the closing of an IPO and the date of listing to three days from six days. The moves to shorten timelines is one of the good intentions–but there may be post-issue compliance related logistical hurdles as much of the delay in the process occurs because of the retail nature of investment with all attendant paper forms and their errors and banking channels and their delays," said Parekh.

While having focus on sustainable growth, SEBI has taken steps towards business responsibility reporting by listed entities, disclosure requirements for issuance and listing green bonds. The SEBI board has also approved the proposal to initiated public consultation process regarding exit opportunity to dissenting shareholders under Companies Act, 2013 in case of change in objects or varying the term of contracts referred to in the prospectus. Process has been eased out when it comes to delisting of small companies and now promoters have been reclassified as public. The framework, once in place, will bring in consistency and also enable investors to take informed decisions based on any such move by the company or its promoters. “During the past few years, SEBI has come up with several policy initiatives in order not only to strengthen the regulatory framework of the Indian Capital market but also align the role of capital market to the larger vision of the Government of India, international best practices and more importantly to the investing and funding needs of the inspirational Indian population. In order to enable investors to take informed decisions, SEBI has continuously increased the transparency and disclosure norms of mutual funds. Transparency was furthered when mutual funds were mandated to disclose its monthly average AUM of various schemes categories and various investor type," says Vyas. Detailing SEBI’s activities towards the best possible investor health, Vyas said, “Protecting the interest of investors is embedded in almost all the laws, rules and policies enacted by SEBI for promotion, development and regulation of markets. A step further in this direction has been envisioned through recent policy measures which include inter-alia single KYC for securities market, increase in cash investment limit by mutual funds, Basic Services Demat Account, e-voting facility, mandatory authentication of listed companies in SCORES platform, Saral account opening form for resident individual investors, interim monetary relief for investors from IPF of stock exchanges, simplification of processes in securities market, enhanced disclosures and transparency by listed companies and exchanges, revised corporate disclosure norms, product labelling in mutual funds, IPEF regulations etc." “Remember the steps taken by SEBI towards risk management when it comes to the commodity derivatives exchanges in the country. SEBI has worked out the formula to review index based circuit breakers mechanism, policy for annulment of trades undertaken on stock exchanges, review of minimum contract size in equity derivatives segment and also we have introduced stress testing of liquid fund and money market mutual fund schemes," said a source close to the development.

Meanwhile, SEBI also agreed to take additional responsibility since merger of Forward Market Commission following announcement made in the union budget 2014-15. “Work load has grown huge over last few years, newer areas are being explored, new responsibilities are being added everyday and though it is tough to meet all the expectations, but the team has been working hard. We are being criticised more for not doing things, some of which actually don’t fall in our jurisdictions but then that may be the rule of game and SEBI is open to criticisms, if done positively," said the source.
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Truth is that Sinha during his tenure has ensured SEBI gets enough teeth and nail. He during his first term observed the market regulator lacks in having weapons to fight against the irregularities and people involved in such wrongdoings. Now SEBI even has the power to arrest someone involved in an offence within its jurisdiction. To put the facts straight, SEBI now can boast of having more power than the United States Securities Exchange Commission (USSEC). Number of adjudicating officers employed with SEBI can even levy a penalty of Rs 25 crore on an erring entity, company. They really do not need to consult any other authoritative body. The Indian market watchdog even has been vested with powers to act by itself without approaching a court of law or any such judicial body and present compelling evidence to take punitive actions against the persons involved in any violation harming interests of the investors.

Now SEBI coming up with the P-Note restrictions amid much apprehensions of dampening the market sentiments, in fact, screening out the people having illegitimate money sources and finally having stronger say over honest individual investors. Fact of the matter is SEBI has been doing what the union government should have done much before since it had made promises to people before coming into power of putting restrictions on circulation of black money in market transactions and also bringing back hordes of black money from various overseas destinations. The 1967 batch IAS who had opted for a voluntary retirement to handle tough tasks in UTI many years back, Sinha leads SEBI from the front taking the heat straight on everytime he cracks his whip on the wrongdoers. The suffocating but neatly maintained SEBI Bhavan does not smell or look like a typical government office. It has more of a corporate flavour, touch of superior degree of professionalism, starting from the front office till the eighth floor. His exposure earned through assignments in the government and away made Sinha realise a perfect mix of being punitive and curative works best. He has been working on that direction braving the odds time and again.

Ten months from now when he packs his bag from this building to go back to his Delhi home, he should leave with this belief that for some people controversies are integral part of life and they better live with these while doing their work, smartly...

SEBI revises ODI norms—Indian KYC now a must

In yet another step taken towards building a base of informed investors, in its latest board meeting which took place on May 20, SEBI revised certain procedures towards Offshore Derivative Instruments (ODIs). Considering various concerns raised by the Special Investigations Team (SIT) in terms of identification of beneficial owners and transferability of ODIs, the market regulator has now decided to make Indian KYC/AML norms must for due diligence of the clients.

“Presently the ODI issues follow the KYC/AML norms of either the jurisdiction of the end beneficial owner or of the jurisdiction of the ODI issuer. In order to bring about a uniformity in the KYC/AML norms, it has been decided that Indian KYC/AML norms will now be applicable to all ODI issuers. The KYC/AML norms applicable to ODI issuers will be the same as that for all other domestic investors. ODI issuers shall be required to identify and verify the beneficial owners in the subscriber entities, who hold in excess of the threshold as defined under Rule 9 of the Prevention of Money-laundering Rules, 2005 i.e. 25 per cent in case of a company and 15 per cent in case of partnership firms/trusts or unincorporated bodies,” said a SEBI media release. In a significant development contrary to the previous norms where ODI subscribers were not required to take prior permission of the ODI issuer for transfer of ODIs to another investor offshore—SEBI has now set a new norm in order to tighten the ODI regime. “It has been decided that the ODI subscribers will have to seek prior permission of the original ODI issuer for further/onward issuance/transfer of ODIs,” said the SEBI note. SEBI has also decided to ask the ODI issuers to file suspicious transaction reports with the Indian FIU, in relation to the ODIs issued by it. The board meet also concluded with the idea of reporting of complete transfer trail of ODIs. “Presently, the details of the holder of ODIs have to be mandatorily reported to SEBI on a monthly basis. The ODI issuers are also required to capture the details of all the transfers of the ODIs issued by them and these can be made available to SEBI on demand. The Board decided that in the monthly reports on ODIs all the intermediate transfers during the month would also be required to be reported,” said the media release issued immediate after the May 20 board meeting of the regulator. SEBI top-brass believed that these steps will help the investors in taking well informed investment decisions.
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The same board meeting also took certain steps including issuance of guidance note on settlement and procedural changes in the processing of compounding applications.

On the highway of markets, SEBI needs to speed up

Sandeep Parekh, a former Executive Director at SEBI holds the title of the youngest ever regulator in Indian history. An alumnus of IIM-A, Parekh kicked off his own initiative, Finsec Law Advisors after parting his ways with SEBI. Sharing his experience and exposure at SEBI with Bhagyashree Vivarekar, Parekh competently states that, with the pure intentions backed by timely implementations, SEBI can do wonders in regularising the Indian capital markets and ensure rapid investors’ participation, but…

1.    In one of the earlier occasions, you had commented that SEBI mostly looked into the market affairs in punitive way rather than being curative? Can you please elaborate your statement with some recent issues handled by the regulator therein?

What I had previously stated was that the regulator’s job is mainly reactive rather than pro-active. Unlike national security, where there is regular feeding of intelligence to prevent terror attacks, the financial regulator cannot prevent fraud before it has occurred. This is much like the law against murder does not prevent murders from occurring. Having said that, SEBI effectively exercises both punitive and curative jurisdiction. The punitive powers are typically in the nature of a hefty monetary penalty which can be upto 25 crore rupees or three times the gain made or even criminal prosecution where the offense is particularly serious. Conversely, as punitive orders seek to punish for past wrong doings, remedial orders are passed not to punish but to protect the market in the future. Where there is evidence of past violation, SEBI frequently passes what is known in market jargon as an 11B order, named after the section in the SEBI Act. These by definition cannot be punitive and must be passed to harm the market in the future and can include such action as being barred from capital raising for companies or being barred as acting as directors of listed companies for individuals. It can also include orders of ‘disgorgement’ or giving up of the illegal gains made. These remedies can be crafted according to the situation and are very malleable.

SEBI often passes interim ex-parte interim orders (ex parte meaning without hearing the person and interim meaning ‘in the meanwhile’ – not as a final order). While these orders are used for cases where time is of the essence and harm would be caused but for such orders, SEBI has often delayed the final orders after the passing of interim orders. Such delay can seriously prejudice the rights of alleged violators before they are held guilty of an offense, as they inflict various prohibitions on the concerned entities, including restraining them from carrying on their legitimate business activities- not to deal in securities market.

2.    You being an ex officio member of the primary market advisory committee of SEBI, what is your say on SEBI’s new agenda to reduce IPO-listing time gap. Would it really help in reducing market volatility and listing costs?

It will limit/reduce the risks related to market volatility that may occur during a longer period. The proposal is to reduce the time period for the closing of an Initial Public Offering (IPO) and the date of listing to three days from six days. The Board did not take any decision in this regard in its recent meeting. Just 6 months back SEBI had shortened the listing time in IPO transactions from 12 to 6 days. The moves to shorten timelines is one of good intention - but there may be post-issue compliance related logistical hurdles as much of the delay in the process occurs because of the retain nature of investment with all attendant paper forms and their errors and banking channels and their delays. SEBI had issued a discussion paper for guidelines on e-IPOs- costs, time savings- aimed at increasing retail participation while shortening time lines.

3.    Usually market participants are not keen on implementing most of the SEBI circulars/new rules, as those come with a baggage of terms and conditions. Are the companies and investors being rigid to take up the changes? How does SEBI pursue them from here?

So far as rules/regulations are concerned, SEBI invites public comments (investors, market participants etc.). It publishes draft rules/regulations/ consultative paper and after a consultation process, frames the regulations. The FSLRC has recommended a mandatory public consultation process. So market participants have an opportunity to register their fears/ disapproval of a specific provision. Further, more informal forums-such as conferences etc.- SEBI officials meet market participants/corporate houses. So, market participants are more willing to comply with the regulations. Also, once a regulation is issued by SEBI, it becomes a mandatory requirement and market participants have to comply with the same. These regulations are tabled in each house of parliament and have the full force of law. Circulars may face more challenges- for instance the recent March 18 circular on greater disclosure by MFs/AMCs. The circular requires the disclosure of the amount of actual commission paid to distributors in absolute terms- this has faced great opposition from distributors, large fund houses etc. They may challenge before the court/SAT or they may write to SEBI seeking a review of the same. The insider trading regulations of 2015 contain various practical implementation issues. Market participants and other bodies have written to SEBI. SEBI did relax one of the provisions- applicability of the regulations in case of ESOPs. But so long as a requirement/prohibition is prescribed under a circular/regulations (and SEBI has not made an explicit relaxation/courts have not struck it down)- market participants have to comply with it, lest SEBI initiates appropriate enforcement action against them.

4.    Companies at times observe conflicts of interest among the financial regulatory bodies in India. Your view

Who regulates whom and how- that has been a matter of debate for long now- particularly among the banking, securities and insurance markets regulators. For instance, SEBI v. IRDA public spat over regulation of ULIPs offered by insurance companies is a case in point. The main issue there was ‘entity- based’ v. ‘product-based’ regulation (it may seem that product-wise demarcations in the regulatory space would be helpful, but it has its own issues-certain entities like insurance companies are engaged in offering more than one kind of product). The regulatory architecture of India’s financial system leaves a lot of scope for many conflicts and overlapping spheres. As a result, there is regulatory arbitrage - either there are several entities without clear division of responsibilities or gaps - there are entities who are not competent enough to effectively regulate. Conflicts of interest - even in RBI’s role as banking regulator v. monetary policymaker do exist. While a public or even a private disagreement is rare (as in the ULIP controversy), there is merit in having a single or at least cohesive regulatory system as proposed by the Financial Sector Legislative Reforms Commission.

5.    SEBI has issued various norms for p-notes holders recently. Will it impact on FII flow in Indian capital markets? Why?

SEBI, in its recent Board meeting, did in fact approve norms tightening the rules on issuance of P-notes/ODIs to enhance transparency and reduce misuse of this investment route by foreign investors not registered with the regulator. For instance, SEBI said that Indian KYC norms or anti-money laundering rules will now be applicable to P-note holders (earlier they could follow their home jurisdiction’s rules). SEBI has also imposed restrictions on transferability and increased the frequency of reporting by P-note issuers. As of now, around 10% of foreign flows come through this route. The tightening of norms on ODIs could make P-notes an expensive and more onerous route for investors, which could affect flows coming into India. The real challenge is that SEBI imposes regulatory conditions on the issuer of p-notes (who are registered with SEBI as FPIs) while the person who is capable of mischief is the end investor, who can deceive the FPI and there is not practical means for the FPI to enforce their inter party contract except for suing for a breach of contract. This is bound to create anxiety in the minds of p-note issuers and few FPIs would be willing to take the risk on their own heads for the violations of others who they cannot effectively control. Besides, the issuers of the P-notes will have to create an even more robust mechanism to track the ultimate beneficiary of P-notes.

6.    We still do not see higher participation of people in capital markets despite removal of entry load through MFs and simplifying KYC norms. Is SEBI looking forward to relaxing some norms for the same?

Mutual fund penetration is very low in India. One major reason is the low financial literacy, the average investor views mutual funds products with skepticism and as a risky investment and find other products such as bank FDs, life insurance policies etc. to be more regular, safe, providing better tax savings, quicker returns etc. SEBI has taken several measures to increase participation of people in the capital market, to channel house hold savings into mutual funds, such as entry load removal; the March 18, 2016 circular is aimed at enhancing transparency in disclosures to investors. Unfortunately, the move to restrict commissions introduced many years back both in the form of capping the expense ratio and also a ban on entry load with few exceptions, has led to distributors reducing their sales of mutual fund products and selling higher return insurance and insurance linked products. This has slowed the growth of mutual funds compared to its potential, though it must be said that mutual funds have grown respectably over the past two years.

7.    Timely amendments to the regulations put forth by SEBI have become the need of an hour, where markets are in transition from reactive to proactive. What steps is SEBI taking in this direction?

SEBI is fairly active in this regard. Based on market and expert feedback it introduces a number of amendments to regulations such as Issue of Capital and Disclosure Requirements, Regulations, 2009 and other such regulations which require dynamic relook from time to time. SEBI rules and regulations are required to be laid before the Parliament and thus they are serious works of law introduced after much deliberation and not casually brought about. SEBI also has power under the regulations to remove difficulties in any interpretation/application of the provisions and can issue directions through guidance note or circulars.

8.    In last five years, can you refer to few good things that SEBI did and few things that might have slipped out of SEBI’s mind for the investors and other stake-holders? 

Some of the good things include introduction of listing norms for start-ups, stringent rules for checking manipulation, stricter policies for corporate governance, IPO related reforms, framework for regulation of investment advisers, research analysts’ regulations, new insider trading norms and creating a new regime of domestic pooling vehicles (alternative investment funds). But in its effort to have stricter regulations in place for certain activities, such as insider trading, SEBI has put into place provisions which would face numerous practical implementation hurdles. Finally, one area where SEBI does need to work on is the speed of it orders, particularly, when it has passed ex-parte interim orders. Any delay after such orders would result in a beheading before the trial problem.

Yogesh Supekar feels SEBI should have done few more things during the first five years of U K Sinha. He prepares this list:

Ten Things SEBI Should Have Done By Now 

With SEBI touching all the regulatory aspects deftly we feel lot more needs to be done going ahead if investors really have to start trusting in the markets and SEBI in particular. 

1. Resources and Technology upgradation :- 

SEBI should take all the necessary steps to see to it that its team comprises of tech savvy members and also if possible professional lawyers should be part of the team. It is very important that SEBI remains abreast with latest financial technology in order to do proper surveillance of increasingly technology oriented financial firms. Mr. Deb Mukherjee CEO of Wisdom Capital believes SEBI is not technologically advanced enough to understand if any single investor or company is playing foul by using advanced technology to make abnormal gains which is against the spirit of SEBI. In order to control 100 percent of manipulation in markets SEBI will have to be proactive in its approach and not reactive. 

2.  Putting Commodities Market reforms on fast track:- 

SEBI has to now speedily introduce reforms in the commodities markets. The immediate issue that would need SEBI's attention will be to improve on surveillance in commodities market that is at par with equities market and also put in place an objective risk management system that is at par with the securities market. It will be interesting to see how SEBI allows banks, mutual funds and Foreign Investors to participate in commodities market. Globally in developed markets the participation in commodities market is much wider. 

3. Democratise enforcements:- 

SEBI is accused of being selective in tackling high profile cases. While Sahara case has been the highlight of SEBI's success there are other pending cases where lot more is expected from SEBI. The matters have not progressed much in case of insider trading allegation against Reliance Industries where the company is accused of shorting futures of RPL first and selling the stock in spot market later. Mr. Sinha will have to aggressively take matter with SAT and progress further on such high profile cases. 

4. Strengthen refund mechanism to investors:- 

SEBI has a mammoth task in hand when it will have to actually oversee the refunds for Sahara and PACL. The refund amount runs into thousands of crores and the task will eat up on lot of SEBI resources.  SEBI should consider increasing its team size if it seriously intends to finish the tasks it has on Hand. SEBI will also have to improve its refund mechanism ensuring that the amount reaches the affected investors. 

5. Easing registration process for FPIs:- 

SEBI has made it easy for Foreign Portfolio Investors (FPI) to register themselves in India. SEBI, if remains sensitive to the market players on FPI registration, should allow paperless registration for those entities who are regulated by foreign regulators for e.g SEC, FINMA, FSA etc. 

6.  SEBI should fast track listing of stock exchanges:- 

SEBI has in principle approved listing of stock exchanges however has raised concerns on self listing. SEBI has said that there is an "evident and clear conflict of interest" risk in self listing. 

Mr. Sinha should consider allowing self listing though self listing under current laws is not possible. Self-listing is what NSE is asking for, BSE is ok with cross listing and MCX is already listed under current laws.  Self listing is when the stock exchange gets listed on its own platform. Self listed stock exchanges includes Australian Stock Exchange (ASX), Hong Kong Stock Exchange, Singapore Stock Exchange, London Stock Exchange, Euronext and Nasdaq.

7.  Strategy to be in place to handle algo trading menace:- 

SEBI needs to quickly establish a framework that will detect any abuse created by algo traders in the system. SEBI will have to decide what it has to do with certain traders gaining advantage due to access to colo (co-location) and High Frequency Trade (HFT).  Decision needs to be made on whether randomization of orders should be adopted to limit advantages enjoyed by algo traders. While deciding on the randomisation of order the impact cost can increase as the liquidity might go down, hence SEBI has to balance it out and come up with a solution that will ensure no party is placed at disadvantage while participating in the market. 

Setting up of an a dedicated surveillance team only to monitor HFT and trying to pre empt the problem that could arise from such trading should be considered at the earliest looking at the increasing share of HFT in total traded volumes. Surveillance should be done on real time basis to pinch off any wrong doing .

8. Outsourcing research and involving academia:-  

As of now SEBI does its research in house and it may benefit SEBI if it can outsource some research and take some help from academia just as the Securities Exchange Commission (SEC) in US does.  

9. Investigate Banks and Financial Institutions to verify compliance of Insider trading norms:- 

SEBI should try and investigate if the banks and financial institutions are openly flaunting the insider trading norms. India's regulatory norms expects a company to share complete information disclosed to lenders and financiers with the public also. It could be that the company is flouting the insider trading norms. 

Financial Institutions and Banks do not always insist companies on placing the price sensitive information which is unpublished in public domain.There is always a possibility that companies reveal data and information to banks and institutions  that is not shared to other shareholders and investors who may benefit from such information. This could be violation of Insider trading norms. 

Corporate bond markets in India have languished for several years even as Banks and equity markets have been the main sources of capital for business in India. Corporate bond market is around 14 percent of gross domestic product (GDP) whereas the bank assets are around 89 percent of the GDP and equity markets around 80 percent of GDP. SEBI should develop long term strategy and stay committed in enhancing the corporate bond market as it is an essential element of the financial markets in India. SEBI should encourage higher participation from foreign investors in bonds issued in local currency and remove certain restriction on money coming from abroad into local currency denominated bonds. Concrete steps should be taken to develop a basic market infrastructure for the corporate bond market in India to flourish.
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As far as the future is concerned, I feel like e-commerce has just about scratched the surface of the Indian economy - the e-commerce industry is expected to form the largest part of the Indian internet market with a value of about USD 100 billion by 2020. This gives us a huge room and scope to grow as a couponing and cashback platform

Indian ecommerce startups have largely stayed away from listing on domestic stock exchanges so far due to unfavorable regulations. The existing rules often measure startups on the same parameters as legacy companies namely being profitable, which have entirely different business models and growth trajectories. Once listed, the regulator has a long list of dos and don’ts for companies to meet on the disclosure front.

Apart from this, even though there are many e-commerce companies in India that hold a lot of potential, here aren’t many investors who want to bet on them because they aren’t profitable yet.

Listing would be the moment of truth for all ecommerce companies. When you are listed, you have to be much more transparent in operations, disclose how you are building a sustainable business model with focus on profitability, cash flows and growth.

We have learnt reliably that SEBI has been working towards further amendments of certain provisions thus allowing e-commerce players to go ahead with listing. How much does this piece of news excite you?

Yes, under the new norms approved by SEBI’s board, the stock exchanges would have a separate institutional trading platform for listing of startups from the new age sectors, including e-commerce firms, while the minimum investment requirement would be Rs.10 lakh. They have also relaxed the mandatory lock-in period for the promoters and other pre-listing investors to six months, as against three years for other companies

There are expectations that a large number of start-ups are already looking to tap this platform and the industry estimates suggest that the total funds to be raised by such entities can run into billions of dollars as it would be mostly the large investors who would be allowed on this platform.

This development is of course, exciting to the whole ecosystem of Indian startups. Even though we aren’t looking to be listed, it would be interesting to see how public listing will add increased accountability to the business practices of the current startups and turn them into mature companies over the coming years.

Additional exit options are always a positive for startups as it makes it easier for investors to achieve returns which therefore makes them more likely to invest in the first place.

Being listed in India would give easier access to those who actually have a front-seat to what is happening in India. You want your listing to be exposed to more than just foreign investors who may not really understand your company.

Is it that small players are being eaten up by a big player. Would these companies survive as standalones in future?

The Indian e-retailing industry is booming. Naturally, everyone with entrepreneurial zeal wants to get on the e-commerce wagon, but it is clear that the e-commerce pie is not one that is up for sharing. Smaller players without deep pockets are facing the heat, and eventually burning out, or, if lucky, getting acquired. Investors are constantly advising young entrepreneurs to avoid burning cash in e-retail businesses which can't even remotely compete with giant e-commerce firms.

With a few exceptions, the bubble will burst for e-commerce companies who have targeted quick money and do not streamline their operations to near an operational break-even.

The e-commerce industry in India has seen a tremendous growth in these last few years and it is expected to be a USD 100 billion industry by 2020. The shopper base in India is expected to cross 100 million by 2016 and mobile commerce is expected to drive this growth.

While most e-commerce companies are not generating profits at the operational level right now, it is because they are in it for the longer haul. By spreading their nets wide at a nascent stage for the market, the larger e-commerce players want to stake an early claim in people’s loyalty.

As mentioned, it’s imperative that e-commerce companies strive for operational break-even over the next 2 years. Those who fail to make progress in that direction will struggle to raise further funds.