Sebi panels divided over market reform move

The Primary Markets Advisory Committee of the Securities and Exchange Board of India (Sebi) and the Securities Markets Infrastructure Leveraging Expert Task Force (SMILE) are not seeing eye to eye over the proposed primary markets reform measures mooted by the latter.

In spite of repeated reminders being sent to them, Sebi officials failed to offer any comments on the issue.

The PMAC, which is a standing committee within Sebi advising the regulator on all issues related to the primary markets, is seen to be less than enthusiastic about the recommendations made by SMILE.

SMILE was set up to look into the processes in the primary market and suggest changes to streamline the process.

For instance, SMILE has recommended imposing a margin of 10 per cent on applications made by qualified institutional buyers (QIBs).

The PMAC, however, does not endorse this view and in fact has skirted the issue by remaining non-committal about it.

A merchant banking source, familiar with the working of both the committees, said, "It looks like they are undecided on QIB margins."

Incidentally, the freedom to levy margins on QIBs is left to the discretion of the book running lead managers.

It is a different matter that the BLRMs have tacitly decided not to levy such margins.

The PMAC's primary grouse with the recommendations made by the SMILE task force is that while the processes (mainly the way information on book-built issues in displayed by the stock exchanges) in themselves are not to blame, it would not work well in the current stock market framework, where transparency is of paramount importance.

Incidentally, most of the market participants are also in favour of the standing committee.

The SMILE has recommended doing away with the registrars altogether since there are only a handful of active registrars and the quality is not very high.

The PMAC is in favour of overhauling the working of the registrars and making them financially more sound.

While the SMILE task force has advocated making some heavy investments in upgrading the infrastructure of the stock exchange and other market participants, PMAC feels that the existing infrastructure can be used more advantageously.

Merchant bankers said while the committees are not involved in this slugfest, the real issues such as the conflict between the listing agreement and the takeover code remains unresolved.