Market regulator Securities and Exchange Board of India (Sebi) needs more powers to detect insider trading, its Chairman U K Sinha said on Friday. Complete review of insider trading will depend on investigative powers of Sebi, he said at a function organised at the IIM (Bangalore). “Detecting insider trading is a major challenge. We are not able to access electronic surveillance, the quality of evidence is poor. We have taken up with authorities to provide more powers on investigating side,” he added. The Sebi boss called for stress on testing of regulatory architecture, adding the regulator had started that exercise. “What is required is coordinated action between different regulators in India to tackle the issues. We need expertise to deal with technology challenges,” he said.
Sebi has no tax levying powers, but “we feel cost and levy on stock exchange is quite high”, Sinha said.
Sinha, who took charge as Sebi chairman in February this year, said the regulator has been in discussions with various stakeholders on a host of issues to finetune the public markets in an effort to be in step with the mature markets. One of the aspects is of the participatory notes (P-Notes). “Very strong KYC is done for participatory notes and sub accounts. Money coming through P-Notes has come down. It used to be 50-60 per cent earlier but its now 15-16 per cent,” Sinha said.
P-Notes are instruments issued by registered foreign institutional investors to their overseas clients, who wish to invest in the Indian stock markets without registering themselves with the market regulator.
On the aspect of global inflows into India, Sinha said FII flows this year was very modest partly because of shortage of liquidity in global market and risk aversion. Sebi is reviewing the entire IPO process and has set up an expert group to look into the same, Sinha said. “We want to reduce time between issue closing and listing and we are also looking at how to provide exit for companies listed on exchanges with low volumes.”
On the macro economic scenario, Sinha said one of the key challenges for India is the fiscal situation. “There are additional challenges on currency, where it could depreciate and we could also face capital outflows. Going forward, there could be pressure on outflows. Asset prices could get disturbed as a result and result in more stress on banking sector,” he highlighted.
On the turmoil in the European Union, he said European banks have over $1 trillion exposure to Asia, and there will be impact if that money goes out. “Then, the crisis can transmit to India. We should be ready to face consequences during a downturn,” he added.