SEBI moots improved market watchdog

New Delhi: In a bid to improve surveillance of the capital market, SEBI has proposed setting up a Self Regulatory Organisation (SRO) soon.

"We are hoping to set up a body of market experts which would include retired members of SEBI, representatives of Mutual Funds and Asset Management Companies who can carry out surveillance," SEBI chairman M Damodaran said at a PHDCCI seminar here.

With more than 10,000 broker and 25,000 sub-brokers operating in the market, it was not possible for SEBI with just 500 employees to provide first level of regulations, he said.

It was for this reason, SEBI was planning to set up SRO for which details would be made public shortly, he said, adding the term of the body could be 3-5 years.

He, however, said an attempt to convert an existing trading body was not in the best interest of the market as it might work against investors.

Damodaran also said SEBI proposes to come out with simplified procedure for Rights Issue, but he did not elaborate.

To give more teeth to SEBI, a comprehensive amendment to SEBI Act is being worked out particularly to deal with prolonged judicial process in dealing with errant companies as witnessed during securities scams.

Apart from increasing fines, the amendment to the Act would bring about changes to deal with very torturous judicial process.

The comprehensive legislation would arm SEBI to utilize the money that is collected by way of fines and penalties for setting up Investors Protection Fund (IPF).

At present, the fines and penalties collected go into the consolidated fund of India and without amendment to SEBI Act, the market regulator would not be able to use them for IPF.

The amendment would also have specific provision for disgorgement of funds and accounts in a bid to provide statutory powers to SEBI in dealing with the issue.

The legislation would also provide for registration of sub-brokers.

Damodaran said that SEBI proposes to set an exchange to provide an exclusive trading platform for small and medium enterprises along the lines of the one in London.

Referring to corporate bond market, the SEBI chairman said both Prime Minister Manmohan Singh and Finance Minister P Chidambaram have emphasised the need for developing a vibrant corporate bond market in India.

"We are working in close consultation with RBI," Damodaran said setting at rest speculation that RBI and SEBI were at loggerheads over the issue.

In an attempt to reduce compliance cost, he said SEBI was developing a single platform for e-filing of corporate disclosures. At present, corprates have to file separately on BSE, NSE and SEBI.

By having a single platform, there will be no dilution of compliance while at the same time reducing the cost involved in it.