Chambers now pitch for changes in regulatory system

Chambers now pitch for changes in regulatory system
ENS ECONOMIC BUREAU

MUMBAI, MAR 29: Chambers of commerce have joined the clamour for cleaning up the stock market stables and revamping the regulatory system. With a host of problems like payment crisis and price rigging hitting the stock markets, leading industry chamber FICCI has called for introducing radical reforms in the capital market without which the disinvestment process cannot be implemented with any measure of success.

"With a wide spectrum of financial markets getting integrated, the need has come to take a fresh look at the regulatory mechanism for the entire financial sector," according to FICCI president Chirayu R Amin. Pointing out that an entire gamut of instruments are emerging -- from fixed instrument debt papers to high risk equity,along with their own market segments, Amin added that these varied segments are getting closely interlinked and enmeshed into each other. The common link among them all is the interest rate and the rate structure.

Not to be left behind, the Confederation of Indian Industry (CII) on Tuesday stressed the need to professionalise the Securities and Exchange Board of India (Sebi) on the lines of the Securities and Exchanges Commission (SEC) of the US.

The apex industry body has also said that the organisation and operatingprocedures of the Bombay Stock Exchange (BSE) and Calcutta Stock Exchange(CSE) have to be radically revamped on the lines of international bestpractices to restore investor confidence. "There should be much quicker identification, investigation and prosecution of all manner of insider trading in securities," the CII statement said.

Commercial banks and co-operative banks are also hit by the `payorder' and the bullion scams. Over Rs 120 crore of Bank of India -- which was paid to big bull Ketan Parekh -- is stuck in Madhavpura Bank which is now under an administrator.

Worried by the trouble in some of the cooperative banks in Ahmedabad and rumours about panic withdrawals in Mumbai, investors have now urged for removal of dual regulatory system in cooperative banks. With a host of co-operative banks failing to follow prudential norms in banking, depositors feel the RBI should tighten the norms for these banks.

In the wake of the ongoing market crisis, sources said, the government is likely to dismantle the board of market watchdog Securities and Exchange Board of India. The new team which will be in place will be assigned with more power to regulate the market efficiently. The tenure of the present chairman D R Mehta will expire in February next year.

The government is understood to have been unhappy with the functioning of the Sebi in efficiently handling the current market mess, reflecting complete breakdown of the financial system. "The Government is also planning to amend the Sebi Act suitably to enable the new team work in a better manner," said a source.

Meanwhile, the tapes controversy has also taken a new twist with Sebi investigations chief LK Singhvi moving out of the tapes part of the probe and executive director CM Mehra coming in his place.

The Sebi probe into possible market manipulation before and after March 2 has thrown up massive funding of big brokers by key players. The Amara Raja Batteries probe has also got linked to this, with at least one entity figuring in both the probes.

Investigative sources said that in one case, that of RNA Builders, Sebi has reportedly found about Rs 50 crore worth of funding into the stockmarkets through some broking entities. Sebi has found that of this Rs 50 crore from RNA, as much as Rs 20 crore has found its way to First Global, the broking firm of Shankar Sharma. First Global figures in the Sebi bear hammering probe and has also been raided by Income-Tax authorities recently.