The Centre has appointed another joint secretary-rank bureaucrat to the board of the Securities and Exchange Board of India (Sebi). Some believe the move could weaken the stature of the regulator.
From Thursday, K V R Murthy, joint secretary, Ministry of Corporate Affairs (MCA), will take charge as a government nominee member on the Sebi
board. He will replace secretary Injeti Srinivas. Recently, Anand Mohan Bajaj, joint secretary of the Department of Economic Affairs, joined the Sebi
board. He replaced secretary Subhash Chandra Garg.
Under the Sebi
Act, the regulator’s board should consist of a chairman, two nominees from the ministry of the central government dealing with finance and the administration of the Companies Act, one nominee from the Reserve Bank of India (RBI), and five other members to be appointed by the government, of whom at least three should be whole-time members.
However, there is no written rule that the Sebi board should have secretary-rank officers as government nominees. But, this will be the first time the Sebi board will have members below the secretary rank, according to observers.
On being asked about this, a Sebi spokesperson said in an emailed response, “As per the Sebi Act, two members from among the officials of the Ministry of Finance and the Ministry of Corporate Affairs are to be appointed by the central government to the Sebi board. Thus, it’s the government’s prerogative to appoint the appropriate level of officials from these two ministries.”
Experts feel this move will dilute the stature of the regulator. In such a crucial organisation, they claim, the senior-most official from the government should be part of the policy decision making process. “The Sebi board comprises whole-time members and ex-officio (nominees of the DEA, the MCA and the RBI) of secretary/deputy governor rank. In the past also, JSs from DEA have been board members — K P Krishnan and Thomas Mathew. But even at that time the MCA and the RBI nominees were a secretary and a deputy governor, respectively,” said a former Sebi official, who did not want to be named.
Sources in the Sebi office said this had happened when there was a certain degree of disagreement between the government and the regulator over certain practices. Early this year, the finance ministry proposed to place its representatives across all committees empanelled by the capital market regulator and asked them to provide a list of all the committees constituted so far. The finance ministry wants to be part of all key decisions which directly impact not just the equities market but the entire financial market ecosystem and the economy.
Sources said the rationale was to improve the coordination and communication between the government and the regulator. Also, policy-making would be more effective and efficient by bringing all stakeholders on the same page.
However, Sebi did not agree with the proposal, as it believes that it could have an impact on the stature of the regulator. Another instance of dissent rose a few months ago, when Sebi requested the government to discontinue the RBI representation on the board.
Sebi was of view that it already had government nominees on board; other regulators such as Irdai and the PFRFA do not have nominees from other regulators. There is no representation of any regulators on the RBI’s board. However, the Ministry of Finance turned down the Sebi proposal, claiming it was important to have the central bank’s opinion to give overall economic view. Sources said among the major Sebi announcements that upset the government were the proposal of disclosing NPAs within 24 hours by creditors. Sebi withdrew the proposal after the finance ministry and the RBI opposed it, saying it would increase additional capital requirement.