Parliamentary panel, Sebi likely to discuss action in key cases

Franklin Templeton fiasco, brokers' default, outcomes of IL&FS & DHFL may be taken up during today's meet

The Parliamentary Standing Committee on Finance will meet Securities and Exchange Board of India (Sebi) officials on Monday and may seek an explanation on the regulator’s action on a host of issues. These include the Franklin Templeton fiasco and defaults by brokers in payout to clients. 

The panel, chaired by Jayant Sinha, is likely to also review outcomes of the measures taken by Sebi in the IL&FS and Dewan Housing Finance cases.

The panel may also want to know the rationale behind the tepid action in the National Stock Exchange’s (NSE’s) co-location case. Sebi dropped fraud charges against the exchange and its former brass.  

It is learnt that the panel has asked Sebi to furnish detailed reports on an entire gamut of issues as it believes that measures taken so far in these cases didn’t fetch the desired outcomes.    

Monday’s meeting is crucial as the panel will review the regulator’s policy and measures from the retail investor’s perspective and submit its recommendations and observations to Parliament as mandated.

An email sent to Sebi remained unanswered. In Templeton’s case, Sebi imposed penalties on the fund house and some of its directors and barred it from launching new debt mutual fund schemes for two years. However, the Securities Appellate Tribunal stayed Sebi’s orders in this matter.

In broker default matters — particularly Karvy Broking and Anugrah Stock Broking — it imposed a Rs 90 lakh fine on the latter. The case of Karvy came into light in December 2019 and it was barred from taking new clients.

In the NSE colocation case, the regulator had, in February, levied a penalty of Rs 1 crore on NSE and Rs 25 lakh each on its former heads Ravi Narain and Chitra Ramkrishna. 

However, it dropped the allegations of fraudulent and unfair trade practices against NSE, Narain and Chitra. The regulator charged them for violation of the Securities Contracts Stock Exchanges and Clearing Corporations (SECC) Regulations.

It is alleged that between June 2010 and March 2014, the trading system deployed by NSE’s colo facility gave unfair advantage to certain brokers.

Earlier this year, the parliamentary panel, in a report, suggested a thorough systemic review by the Reserve Bank to pre-empt IL&FS kind of crisis, involving systemically important entities.

The regulator, in December 2019, had imposed a fine of Rs 25 lakh each on ICRA and CARE Ratings in the matter, saying the default by IL&FS occurred due to “lethargic indifference and needless procrastination and laxity” of these rating agencies.

DHFL promoters, too, have been restrained from buying, selling or dealing in securities, either directly or indirectly.

The committee also stressed on the need for a fresh evaluation of the credit rating framework in the country.