Big entities can create big mess, says Bhave

With less than two months to go before his tenure ends, Securities and Exchange Board of India (Sebi) Chairman C B Bhave expressed his frank views for the second time in less than a week. This time, the target was big companies that, according to Bhave, are a challenge to regulate.

“Big entities can create big mess. And, the challenge before the regulators is: Can we impose extra regulations on big entities... because if they fail they create a big mess,” said Bhave at a function here.

The statements of the Sebi chief assume significance when seen against the backdrop of the some recent investigations and orders passed by the capital market regulator.

Last month, Sebi barred two Sahara Group entities — Sahara India Real Estate Corporation and Sahara Housing Investment Corporation — from accessing the securities market for alleged withholding of information from investors and the regulator. It also cast doubt on the balance sheet of the Lucknow-based business house because of the alleged lack of transparency over the source of funds.

In another instance, the regulator issued a showcause notice to Anil Dhirubhai Ambani Group (ADAG) Chairman Anil Ambani in a matter related to alleged violation of overseas debt norms.

Bhave, however, said the problem of regulating big companies was a global phenomenon and not restricted to India alone. The world is grappling with this question, he said, referring to the collapse of Lehman Brothers in 2008.

“Is it possible at all practically to say, because you are ‘X’ size, you need more capping; you can’t take more than ‘Y’ risk; or the choice is to say you can’t be this big, we are just going to break you up,” he asked.

The Sebi chief further said the challenges were compounded by the fact that large companies had access to political and media circles and, more often that not, the regulator ended up being criticised for its actions.

“This is more difficult to handle because these big entities have big persuasive ability... their political and media access is tremendous and, therefore, regulators are going to be at the receiving end when they try and do something about these entities,” he said.

“We have not found an answer to this... and they have tremendous ability to work around regulation... we need to handle this and it will be interesting to see how this gets handled in the days to come,” said Bhave, who had only last week openly advocated provisions for maintaining adequate autonomy for regulatory bodies.

Source : Business Standard