Sebi chief Ajay Tyagi scores big in first 100 days

From new fundraising instruments like municipal bonds and infrastructure investment trusts (InvITs) to passing orders in long-pending matters like the Reliance Industries ‘unlawful gain’s case, Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi) has made some right moves in his first 100 days in office.

He took charge from predecessor U K Sinha on March 1. The senior bureaucrat couldn’t have entered the stock market fray at a more opportune time, with shares climbing to record highs, investor flows into mutual funds at new levels and buoyancy in the Initial Public Offer market.

In less than a month, Sebi had barred Reliance Industries from accessing the derivatives market and asked the Mukesh Ambani-led entity to disgorge Rs 447 crore (with 12 per cent interest for 10 years) it was deemed to have made unlawfully. (The company has challenged Sebi’s order at the Securities Appellate Tribunal).

Another step was tightening of the participatory notes (p-notes) framework. With Tyagi as chair, the Sebi board of directors has deliberated twice on the issue. In April, the board reiterated the stance that Indians, including non-resident ones, were barred from taking direct or indirect exposure through p-notes. Earlier this week, Sebi further tightened the norms by barring p-notes from taking unhedged positions in the derivatives segment, to curb speculative trading.

Tyagi has also set a tight September deadline to finish investigation into 145 cases of alleged long-term capital gains tax evasion. Sebi will then work with the tax department for further action.

On commodities, Sebi has allowed the much-awaited options trading. It has also allowed hedge funds to transact in derivatives. The regulator also took an important decision to provide unified licenses for commodities and equity brokers.

On the primary market front, Sebi eased the lock-in norms for private equity (PE) investors registered as Category-II alternative investment funds (AIFs). The market also saw two successful InvIT issues, proving the cash-starved infrastructure sector an additional avenue for fund raising.

Tyagi also eased the municipal bond framework, which saw the Pune civic body raise Rs 200 crore. The regulator expects 10 municipal bond issuances before the end of the calendar year.

Under Tyagi, Sebi has worked with the Reserve Bank of India (RBI) on the issue of loans going bad. The markets regulator has provided special dispensations to banks and acquirers of shares in listed distressed companies.

Sebi also acted to boost trading volumes at Gujarat International Finance Tech-city (GIFT), the country’s first international financial services centre (IFSC). It allowed trading in single stock derivatives and mutual fund participation.

There is also action on some challenging issues. Sebi has set up a high profile committee to suggest changes to the corporate governance framework. The regulator is also planning a discussion paper on the derivatives market, to study product suitability and risk. Unhappy with the rating process, Sebi plans to overhaul norms for credit rating agencies and debenture trustees.

Those in the segment also say Sebi will sooner or later review the insider trading and takeover code regulations.

“He is a man of action. The majority of his actions so far have been to resolve long pending matters. Under his leadership, Sebi has passed several orders that have been pending for more than a decade,” said Sandeep Parekh, founder, Finsec Law Advsiors. “He also needs to also fine-tune or plug the loopholes in some of the existing securities laws.”

A key issue which could soon see a conclusion is on the National Stock Exchange (NSE), which allegedly provided preferential access to certain brokers at its co-location facility. Sebi also plans to initiate a forensic audit to ascertain if any of the entities involved made any monetary gains.

Another challenge is the backlog of 7,000-odd pending cases. To resolve the matter efficiently, Tyagi has appointed additional adjudicating officers (AOs) and set a one-year target for completion of all the investigations. Sources say he's trying to rationalise the consent mechanism norms to clear the backlog.

There has also been some streamlining in the appointments process. There were apprehensions among Sebi employees over external hires of executive directors. The new chief has increased the number of these posts, giving equal opportunity to Sebi employees.