NSE co-location case serious, says SEBI

Regulator says exchange may have to refile papers for IPO The National Stock Exchange (NSE) may have to refile papers for its Rs. 10,000-crore IPO after addressing issues related to alleged preferential access given to some brokers, watchdog SEBI’s Chairman Ajay Tyagi said, terming the co-location case as “a serious matter”. The leading stock exchange had submitted to SEBI its draft prospectus for the public offer in December, but the approval has been hanging fire due to issues surrounding the ongoing probe into the NSE co-location case, where some brokers allegedly got preferential access to the exchange’s systems. To a query on whether the NSE will have to file revised financial statements and DRHP, Mr. Tyagi said, “That is for them to decide... It is a serious matter. If I was an issuer, I will see that these are addressed and then only go back to DRHP.” Asked whether it is a regulatory requirement to file a revised DRHP (Draft Red Herring Prospectus), the SEBI chief said, “I think they themselves will do it.” Mr. Tyagi was speaking to reporters on the sidelines of an event organised here by the Standing Conference of Public Enterprises (SCOPE). In the case, SEBI wants its forensic audit to quantify unlawful gains made by some brokers, even as the exchange is trying to reach a settlement of the case through consent mechanism. Rating agencies Mr. Tyagi also said the regulator was “not happy” with the current state of affairs at credit rating agencies and would soon float a discussion paper for a new set of norms for them. This comes within days of the watchdog tightening disclosure norms for the credit rating agencies (CRAs) amid concerns about delayed rating action regarding debt-ridden firms. “We are bringing out a discussion paper within a month,” Mr. Tyagi said in reply to a question on how SEBI would deal with the situation if the rating agencies failed to adhere to the new set of stricter norms. Mr. Tyagi said SEBI would look at views from all stakeholders before taking a call. “We are not happy with the current state of affairs at the credit rating agencies,” he said. Governance concerns Emphasising the need for improved corporate governance practices at listed companies, Mr. Tyagi also today said 20% of public sector enterprises still do not have a single woman director. He also said that in many cases, independent directors are appointed and removed at the whims and fancies of promoters of companies. “20% of public sector companies still don’t have a single woman director,” Mr. Tyagi said here. Regulations require listed firms to have at least one woman director on their boards. Mr. Tyagi said much needed to be improved on the functioning and appointment of independent directors and audit committees at listed companies. ‘No preference for PSUs’ He also said having different norms for listed public and private companies might be “perceived wrongly”. Interacting with senior officials of public sector undertakings here, Mr. Tyagi said the regulator would have a dialogue with the government on compliance of these companies with certain regulations. The idea is to ensure that listed companies follow some discipline; and, between public and private sector (companies) they follow the same rules, he said. His remarks assume significance amid suggestions from certain quarters that PSUs should be given more time to comply with the minimum public shareholding requirement.