The differences between the finance ministry and Securities and Exchange Board of India(SEBI) on who is responsible for preventing the repeated scams in the share markets was thrown into focus in the JPC meeting.
In its deposition before the Joint Parliamentary Committee on stock scam yesterday the ministry told the members that it was a policy making body which cannot intervene in the markets on a day to day basis. It said this was the responsibility of SEBI.
The JPC which began its cross examination of witnesses from yesterday has however rapped the ministry for what it called as an attempt to shift responsibility for both the UTI and the earlier stock scam on to SEBI and RBI. It has also said that conveying the decision about the freeze on sale and repurchase of US-64 at the eleventh hour was "a very unusual step".
According to sources the members were agitated both about the ministry's reaction to the stock scam as well as its ability to judge the impending crisis in UTI. It has accordingly asked the government to provide the details of the working of the high level committee on capital markets since 1995 to the JPC. The committee is chaired by RBI governor and includes the finance secretary, SEBI and IRDA chairmen.
Briefing reporters later JPC chairman SPM Tripathi said finance secretary Ajit Kumar has been asked to report back to the committee with the details of the dates on which he first heard from UTI on the proposed freeze on US-64 sale and repurchase. This was in response to the ministry's deposition that the letter from UTI on the proposed freeze arrived just two days before UTI board meeting. About SEBI, the ministry told the committee that it is ready with the cabinet note to enhance its powers based on the Dhanuka committee report. Tripathi said this will allow SEBI to regulate more effectively the issue of capital, listing and transfer of securities and protect the interests of investors.
The chairman said the ministry has assured the committee that unlike in 1996, badla will not be reintroduced again in bourses. Ajit Kumar said instead a modern system for deferral products will be introduced. Alongwith the secretary the other officials present were ministry was represented by Advisor to Finance Minister Rakesh Mohan and joint secretary in the capital markets division, J Bhagwati.
Tripathi said the JPC was informed that the ministry was not in favour of changing the UTI act because of which the mutual fund's compliance with SEBI was still a voluntary one.
