Under new chief Ajay Tyagi, SEBI is working overtime to resolve legacy issues

Ajay Tyagi, the newly appointed Chairman of The Securities and Exchanges Board of India, has set a time-frame of six-to-nine months in which to clear pending legacy issues. The market regulator will be taking up, on a war-footing, high-profile cases which need urgent resolution. Key among the investigations that Tyagi will be launching are those pertaining to NSE whose algorithmic trading systems have been allegedly misused by certain brokers. Tyagi is also considering changes to the seven-year-old ICDR or Issue of Capital and Disclosure Requirements. In response to market participants, SEBI will be revisiting old definitions pertaining to who constitutes a promoter. Private equity funds with a sizeable stake in a company are classified as a promoter which subjects them to disclosure norms. As such PEs have been lobbying hard with the market regulator to have the ‘promoter’ tag removed. SEBI wants to institute a common committee for a Stewardship Code in India. IRDAI has been the first of the regulators to set up stewardship guidelines, which will require insurance companies to vote on shareholder resolutions as well as be in touch with companies to address key issues. A number of countries have formed the so-called stewardship code to make sure that institutional investors carry out their duty towards their investors. “For improving corporate governance the regulator wants to set up stewardship code for mutual fund companies,” said a source privy to the development. Ajay Tyagi was a member of the working group on the development of corporate bond market in India before joining SEBI as Chairman. As per the recommendation SEBI may launch a corporate bond index to track the performance of local-currency denominated corporate bonds from India. The regulator will create a centralised database of all bonds issued by corporates. Database should be made available free of cost to all the investors. As part of its initiatives, SEBI may allow market-making by regulated entities like banks, PDs (primary dealers), in addition to brokers to make the corporate bond markets more vibrant. A market maker is a dealer in securities or other assets who undertakes to buy or sell at specified prices at all times. Ajay Tyagi’s other main task will be to integrate spot and derivative markets. Tyagi will be holding discussions with the Agriculture Ministry and Warehousing Development and Regulatory Authority. SEBI is not keen to regulate the spot market especially agri commodities but is ready to work with whoever is the competent authority. SEBI will float a mechanism and time line for a unified licence for stock and commodity intermediaries. SEBI will introduce new products including options in commodities in the next six-to-nine months. The move envisages greater elbow room for alternative investment fund category III as well as mutual funds to participate in the commodity market. SEBI will also outline a road map for a unified exchange and is looking to implement it before March 2018. NSE board was directed by SEBI to launch a probe into algo trading systems following reports they were misused. Following SEBI's orders the bourse had hired Deloitte last year to conduct a forensic audit. “SEBI is trying to complete the investigation as soon as possible and take action if it is required,” told a source to Moneycontrol. Similarly, SEBI has initiated an adjudication process against the brokers involved in the alleged NSEL Rs 5,5740000000 scam. “We are hoping the regulator will not take more than six months to take a decision since the three-member committee [appointed to look into the NSEL case] will submit a report to the whole-time member. Soon after, the whole-time member will give personal hearing and pass the order," told a source to Moneycontrol.