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Long way to go before Sebi grows up

New Delhi, Dec. 19: The Joint Parliamentary Committee today blamed market regulator Sebi for its inability to regulate the capital market efficiently and observed that it has 'a long way to go before becoming a mature and effective regulator'.

“If the Securities and Exchange Board of India had continued to improve its procedures, vigilance, enforcement and control mechanism, it could have been effective in a situation where the stock market became volatile leading to an unprecedented surge and subsequent depression in the capital markets,” the report remarked.

The JPC observed that the country’s capital market was neither deep nor wide enough to moderate volatility and, therefore, a few players were able to manipulate the stock market.

The report said Sebi’s inspection-quality of stock exchanges were poor and time consuming. “It was so poor that it could not detect Calcutta Stock Exchange’s non-inclusion of crystallised long positions in the outstanding positions of the brokers.

To stem the volatility and prevent stock market scams, the government had passed the Securities and Exchange Board of India (Amendment) Bill, 2002 which will arm the market regulator with greater powers to deal with market shysters and help restore investors’ confidence in a market that has been on a downhill course for over 15 months.

The committee felt that Sebi needs to be professionalised with adequate in-house manpower having a sense of belonging and commitment to the organisation. “There should be adequate manpower assessed on a scientific basis to man various positions in Sebi,” it said

It also disapproved Sebi’s attempt to abdicate surveillance responsibility and put the entire blame on the stock exchanges for its failure to detect market manipulations.

“Ensuring safety and integrity of the market is a pre-requisite for the protection of the interests of investors in securities which is the foremost duty of Sebi,” the report said.

The committee observed that if Sebi had been “more active and the ministry of finance been more insistent on Sebi measuring up to its macro accountability to give comfort to the government that the regulator is performing its job in a professional manner, then things might have been forestalled.”

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