Financial Daily from THE HINDU group of publications
Monday, Dec 23, 2002
We will implement them in toto, says SEBI chief
NEW DELHI, Dec. 22
THE Securities and Exchange Board of India (SEBI) will "faithfully implement" the recommendations of the Joint Parliamentary Committee (JPC) that inquired into the Rs 5,000-crore stock market scam of 2001.
"I fully respect the observations made by JPC in its report. The committee's report will be the guiding philosophy for our actions. We will faithfully implement all its recommendations," the SEBI Chairman, Mr G.N. Bajpai, told Business Line here.
The JPC had underscored the need for SEBI to urgently strengthen its surveillance mechanisms. It disapproved of SEBI's attempt to abdicate its surveillance responsibility and blame the stock exchanges for their failure to detect market manipulations.
The committee had also called upon SEBI to evolve an effective system of compliance with its own inspection findings. The report noted that "despite the elaborate procedure set out by SEBI for inspection of stock exchanges and taking follow-up actions thereon, it had not been able to ensure compliance of its recommendations within a timeframe".
The committee had recommended that the role of executive directors in-charge of the secondary market division and the surveillance division in SEBI during 1999 and 2000 need to be critically looked into for not ensuring compliance with various actions recommended in the inspection reports of 1999 and 2000.
The JPC had highlighted that SEBI's quality of inspection of October 1999 and September 2000 was so poor that it could not detect "Calcutta Stock Exchange's (CSE) non-inclusion of crystallised long positions in the outstanding position of brokers, although this was clearly violative of SEBI's instructions of July 1999".
It now asked SEBI to immediately call for "explanations" from all concerned officials involved in the task of inspecting CSE during 1999 and 2000, regarding their failure to detect non-inclusion of crystallised long position in the outstanding position of the brokers and action be taken for "dereliction of duty".
The committee held that the shortcoming in SEBI's inspection was all the more serious if viewed in the light of the regulator's categorical assertion that had the CSE implemented SEBI's instructions, the payment problem would have certainly been avoided.
Further, the JPC asked SEBI to augment its staff strength, if need be, and progressively increase its coverage of inspection of brokers.
It also rapped SEBI for the performance of its nominee directors in the discharge of their duties.
It highlighted that one nominee director of SEBI in the CSE did not attend "any sitting out of 26 sittings of the governing board during his tenure from November 1996 to June 1998".
Although SEBI had now discontinued the system of appointing nominee directors, the JPC urged the Finance Ministry to undertake a fresh review of the system of nominee-directors, keeping in view the proposed demutualisation and corporatisation of stock exchanges.
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