SEBI's New Chairperson Madhabi Puri Buch Has A Headstart, But...

The appointment of Madhabi Puri Buch as chairperson of SEBI marks the first such private sector appointment in some 15 years. Buch has just finished serving a five-year term as whole time director at the country's securities market regulator. Prior to that, her many years in the private sector included time spent leading the Singapore office of Greater Pacific Capital. Before that, Buch led ICICI Securities Ltd., among India's early investment bank-cum-brokerages.

The combination of private and public public experience suggests "continuity with change" said one capital markets expert. Another described her as a "nuts-and-bolts person". She's a "bold decision maker" said one securities lawyer. She'll bring data-driven decision making to the regulator said another. They all agreed that streamlining enforcement procedures at SEBI and developing newer areas of regulation around ESG will be critical priorities in Buch's initial three-year tenure.

‘Expect Data-Driven Decision-Making’

- Sandeep Parekh - Founder, FinSec Law Advisors; former Executive Director, SEBI

This is an appointment to celebrate because for the first time, it’s not just a woman leader, but also somebody from the hardcore private sector, a corporate leader has been appointed to the job of SEBI chairperson. Madhabi Puri Buch has a lot of knowledge of the financial markets and how they work. That's number one. Number two is from my own experience of having worked with her as part of the Mutual Fund Advisory Committee – that is that she's very data driven. You can expect a lot more decision-making that happens based on data rather than based on what people’s opinions are.

On where SEBI should go in the next three years, broadly the main key has to be improvement of both the quality and the timelines of enforcement.

Those are the two or three main major things which need to be done going forward.

Broadly, SEBI is a well-run organisation and there doesn’t seem to be a case for a massive overhaul of all regulations. Most of the changes would be around the margins. The two things mentioned earlier are important – speed and quality of enforcement, and the ease of doing business.

On matters that are currently under deliberation and has been moving, has been in the right direction.

That’s my one pet area to rework on.

Issues like the concept of promoter going away, the things they're doing with respect to better disclosure for loss-making companies – all of them need to be taken to their logical conclusion. All of that is fine and I don't think there's any specific area which I would say needs to be fast-forwarded.

‘She Will Hit The Ground Running’

- Amit Tandon - Managing Director, Institutional Investor Advisory Services

The appointment

The choice is good because Madhabi has been at SEBI for the last five years indicating that she has a very good understanding of the current state of the market and the current issues SEBI has been dealing with. Therefore, it is continuity with change.

The combination of private-public experience at the helm at SEBI brings a good balance.

There will be some new thinking or a fresh way of looking at things, but at the same time she's not going to come in from the cold and ask, what am I looking at? What do I need to do?

This will help her hit the ground running which is important given that I expect this year to be choppy.

Priorities

As for key priorities, there are several projects SEBI has begun or trends that are mid-cycle that need shepherding and completion – such as the shift to T+1 settlement; the trend away from promoter-run companies to diversified ownership; and replacing promoter with controlling shareholder.

The second thing is to ensure that the Indian market remains attractive. While a large part of the issuances is happening in India, we have exported parts of our markets in terms of offshore trading. What is the best way to bring this trading onshore? How do we ensure primary issuances do not move offshore? What can be done to develop India as a regional hub for markets.

There is a pressing need for a review of regulations by way of simplification of language and removal of ambiguities. Some recent orders have exposed gaps that need filled. the Zee Entertainment - Invesco court order that created an anomalous situation regarding appointment of directors by the nomination and remuneration committee. What happens to shareholder rights in this instance?

Or the PNB Housing-Carlyle matter that has led to new regulations on preferential allotment that will prove tedious for many genuine investors keen to fund poorly performing companies. At one level it favours incumbent managements.

SEBI will also have to devote policy bandwidth to sticky issues like management compensation. These are seeing push back from institutional investors but often get passed due to promoter support. Is the solution majority-of-minority vote or special resolution? What is the right balance – because you cannot push all decisions to minority investors. So at least it calls for greater information to be disclosed.

The other is, newer agendas like ESG, which SEBI has kind of started to think about and build the blocks around. Hopefully it will continue to do so and become more nuanced in its thinking, Other issues include group governance structures, for businesses that have several subsidiaries or are part of a large business group.

SEBI does have an extensive consultation process. I will like this to be more robust, with the intent and rationale being spelt out and disclosure of suggestions received.

SEBI needs to speed up its investigations and orders. SEBI should give itself a threshold – say five years, or better, three years. While I am beginning with three years, it should be one year or six months because it's a market which is very dynamic. There's no reason in passing judgment now on something that happened in 2015 from a market perspective. If an investigation or case is not closed in three years or two years or one year, they should stop pursuing it – though as a regulator it might want to see the right thing being done.

Finally, there is staffing and capacity building. The Kotak committee pointed the woeful understaffing. This needs to be a priority.

‘Restoring SEBI’s Enforcement Credibility Key’

- Umakanth Varottil - Associate Professor of Law, National University of Singapore

It is very encouraging to have someone like Madhabi Puri Bunch, who is very experienced in the market itself, appointed as SEBI chairperson She comes from industry in the financial services sector, so there's a change compared to what it used to be before where a lot of SEBI appointments were from the bureaucracy or the public sector. This is a welcome change. Of course, it's going to be an experiment to see how it goes, but I think it's a good move.

In terms of where SEBI’s agenda goes from here, let’s split it into SEBI’s two roles – one is to develop the market and the second is to regulate the market. From a developmental perspective, there's certainly going to be a lot more focus that's needed on things like technology, newer types of instruments that could potentially be issued to investors. On the general development of the capital markets, there have been some concerns lately on IPOs and their pricing issues, those will have to be addressed. How the Life Insurance Corp. of India IPO which is going to be a blockbuster deal is going to pan out will also be a test case for the new chairperson.

Cases like the recent one involving the former CEO of the National Stock Exchange will again be test cases where the regulator will have to come out looking strong and credible on enforcement because the markets will look to SEBI as a guardian. On the regulatory process, there should be greater engagement by SEBI with industry and the markets. Increasing the consultation process would make it more transparent. These are important measures in ensuring credibility of the institution.

To bring those themes together – the SEBI chairperson will require a combination of innovation from the market development perspective on the one hand, and secondly, ensuring credibility of the institution from an enforcement perspective. Having these themes in mind would be something that will be of near-term interest for the chair.

Further out as well, the same two themes will also continue for the next two or three years. From a broader perspective, SEBI will have to keep a close watch on things like globalisation of capital markets, direct listing of companies overseas, and in some ways competing with other market, both within Asia and around the world. If India has to be looked at as a destination for investment, going forward, investors will be a lot more focused on things like ESG, social impact investing, and should also be kept in mind by SEBI.

‘A Bold Decision-Maker’

- Shruti Rajan - Partner, Trilegal

Multiple wins through this appointment for the industry. A well-respected female professional with a private sector background taking the charge at SEBI is incredible. She is clearly blazing a trail that will open up the horizon for many more women leaders.

Her role as a chairperson will be much more cross-disciplinary than her time as a whole-time member. A bold decision-maker with a penchant for well-informed and transparent decisions across the departments she was in-charge of, she has led committees such as the TK Viswanathan panel for insider trading / Prohibition of Fraudulent and Unfair Trade Practices amendments with great success and clarity. I reckon she will be receptive to market needs and will get all hands-on deck on areas such as ease of doing business, ESG / governance as well as bond markets, all of which have been work in progress for quite some time.

‘Nuts-And-Bolts Of Regulation Matter To Her’

Dhirendra Kumar - CEO, Value Research

I’ve had the opportunity to work with Madhabi Puri Buch closely as part of the Mutual Fund Advisory Committee, Market Data Advisory Committee, and the Research Advisory Committee. One thing that I can say with certainty is that she’s a nuts-and-bolts person, someone who believed in settling principles to avoid conflicts within regulations. For instance, as part of the Data Advisory Committee, her focus was to standardise the definitions of each and every term being used by the regulator. She also accepted our suggestion on how data should be represented, disclosed for different types of users, and these have found a place in SEBI’s efforts on data democratisation vis-à-vis data on IPOs, new fund offers, stock exchanges.

She has spearheaded a set of significant changes in the mutual fund regulatory framework – classification of schemes, risk disclosure, inter-scheme transfers, and others. These have doubtless benefited investors.