Securities and Exchange Board of India (Sebi) chairman G N Bajpai said the only solution to accounting frauds was to switch from a rule-based accounting system to a principle-based accounting system.
Speaking at a seminar organised by the Confederation of Indian Industry (CII) today, Bajpai said in spite of a plethora of rules, accountants could get past them through ingenuity. There was an urgent need to improve accounting standards, and initiate auditing of disclosures, he said.
The market regulator is unveiling an electronic data retrieval and information storage system in Mumbai tomorrow, which will enable a person to access data on around 200 companies from the Sebi site.
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Bajpai said Sebi was also working on improved disclosure norms for private placement of debt. "We have to look at the disclosure requirements, given a market that aggregated Rs 57,000 crore in just six months, from October-March 2002".
The Sebi chairman said while private placement was not regulated by Sebi per se, issues that were widely subscribed to should be deemed to be public and, therefore, be listed. There should be a listing requirement before any paper could be traded in the secondary market, he added.
Listing a four-point agenda for improving debt markets, Bajpai said apart from listing and disclosure, debt should be traded only in the dematerialised form and compulsorily rated. This would also include restricting rating agencies from providing consultancy services for an issue rated by them, he said.
Responding to a query, Bajpai said Sebi was also considering whether regional exchanges should be allowed to trade in debt instruments. He said the move towards the T+1 trading cycle on bourses and corporate governance ratings were meant to tide over the problems stalking companies.
Earlier, speakers said there was "a regulatory web on the private placement market for which no one agency was fully responsible". Rakesh Garg of HSBC said the norms for private placement should match public issue guidelines.
Finance ministry consultant Ajay Shah said the debt market had a tremendous potential if small investors were allowed to invest. He said an expert group was considering expanding the debt market to rope in retail investors.