Looking ahead in Regulation and Supervision G. N. Bajpai Chairman Securities and Exchange Board of India

2 Regulations A regulator’s focus should not be on the regulations but on the Development of the Market. Regulations just happen to be the incidental to the development.  National mandate to SEBI is “Development and Regulation of the Securities Market”.

3 Regulations Business environment is changing faster than ever before. In this dynamically changing business environment, Regulations should be enterprising, forward looking and evolutionary in nature. We can not shoot a moving target with a static gun position.

4 Regulations Regulatory approach should undergo a paradigm shift, transiting from being enforcement oriented, reactive, adversarial, incident driven and hard to compliance and partnership oriented, preventive, problem solving and soft.

5 Regulations Regulations should define the broad framework/ parameters for the game. Within that framework, Market Participants should be allowed to operate without intervention. Having defined the rules for the game, sight of the regulator should move from risk orientation to risk specific tactical choices – tools selection, best time intervention and regulatory style to fit audience.

6 Regulations Traditional business models are gone. Industry is an obscure word. Today, the world is talking about the convergence of the so called industries resulting in the “opportunity zones without boundaries”. This convergence of the business poses substantial challenges to the regulators. They need to co-operate at the level more than ever before and strike an intelligent balance between the safety of the market and the creative initiatives of the market participants.

7 Regulations Regulators should focus on becoming: An innovator An innovator A facilitator A facilitator A confidence builder A confidence builder

8 Regulations at SEBI Driven by the aforesaid philosophy, SEBI aims at making: “Indian Securities Market truly world class, competitive, transparent and efficient.

9 Regulations at SEBI To accomplish our aim, we have structured an ambitious Strategic Action Plan, which revolves around the four spheres: INVESTORS (CONSUMERS), INVESTORS (CONSUMERS), FIRMS (CORPORATE), FIRMS (CORPORATE), FINANCIAL MARKETS FINANCIAL MARKETS (EXCHANGES, INTERMEDIARIES), AND REGULATORY REGIME. REGULATORY REGIME.

10 Strategic dimensions of the Regulations Corporates Investors Regulatory Regime Exchanges and Intermediaries SAP

11 Investors Objective- Investors are enabled to make informed choices and decisions and achieve fair deals in their financial dealings. Initiatives: The launch of EDIFAR. The launch of EDIFAR. Strengthening Disclosures Strengthening Disclosures Benchmarking for the Mutual Funds schemes Benchmarking for the Mutual Funds schemes (both equity and debt). Valuation norms for the unlisted scrips, in the Mutual Funds’ portfolios. Valuation norms for the unlisted scrips, in the Mutual Funds’ portfolios. Rationalization of the DP charges. Rationalization of the DP charges.  Launching nation-wide Securities markets awareness and Investor Education campaign.

12 Corporates Objective - Regulated firms and their senior management understand and meet their regulatory obligations. Initiatives: Institutionalised feedback mechanism between regulator and regulatees Institutionalised feedback mechanism between regulator and regulatees New Insider Trading Regulations stipulating code of conduct for listed entities and regulated firms. New Insider Trading Regulations stipulating code of conduct for listed entities and regulated firms.  Strengthening of corporate governance

13 Markets and intermediaries Objective - Consumers and other participants have confidence that markets are efficient, orderly and clean. Initiatives: Introduction of derivatives Introduction of derivatives Introduction of T + 3 Rolling settlement Introduction of T + 3 Rolling settlement Demutalization and corporatization of the exchanges Demutalization and corporatization of the exchanges  Margin trading  Securities Lending and borrowing  New products in derivatives market  Development of the retail debt market.

14 Regulatory regime Objective - An appropriate, proportionate and effective regulatory regime is established in which all the ‘stakeholders’ have confidence. Initiatives: SAT and Chairman’s orders being posted on web-site SAT and Chairman’s orders being posted on web-site Consultative process before framing Regulations Consultative process before framing Regulations Speeded up Regulatory actions Speeded up Regulatory actions  Review of various regulations  Setting up of central listing authority (CLA)  Strengthening regulatory transparency  Re-engineering of systems and processes

15 Regulatory reforms Regulatory reforms will focus on: Effects/impacts of various initiatives and results. Effects/impacts of various initiatives and results. Risk control, problem solving and compliance management. Risk control, problem solving and compliance management. Collaborative partnership with various stakeholders in the market, for regulations management. Collaborative partnership with various stakeholders in the market, for regulations management.

16 Concluding remark I am only half joking when I suggest that (the author) ought to put a warning box somewhere in (here) that says something like: Warning: Trying these methods is more difficult than you can imagine. You must really be desperate to have an impact, or be totally dissatisfied with your program’s status quo to make this undertaking worthwhile” Joe Dear

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