The change was huge and great. There was a clear direction in which the regulation was supposed to go. The importance of the opinions of market players and their issues was acknowledged. Emphasis was placed on the logic and data behind the rule changes. And there was recognition that the role of regulators goes beyond regulation, to nation building.
By delivering the inaugural address, the chairman, Sebi, clearly sent the message that Sebi’s rules are disclosure based and not meant to be restrictive. For any product or transaction across the primary or secondary market, there may be additional requirements to provide adequate information, but the intention will not be to stop things. She emphasized that as a country we are not a “nanny state” that would dictate what people should do.
The other striking aspect of her talk was about following a consultative approach. She invited suggestions from marketers, participants, practitioners and industry associations. The counter-regulation of the regulators and the market participants could be distinguished by the recognition that markets function and function powerfully only because of their participants. While it is important for market participants to work with regulators and within the regulatory framework, so too was the commitment of regulators to find solutions to the issues faced by participants for the proper growth of the market. One notable move is that a dedicated head has been appointed in each department of Sebi who is given the task of developing market trends and suggesting improvements.
While the chairman welcomed practical suggestions from marketers and industry players, there was an unmistakable emphasis on making specific recommendations backed by concrete data to justify the same. Obviously, general comment or historical matter is unlikely to be entertained. But it is absolutely open to receiving practical suggestions for improvement if they were supported by sufficient background work, logic and data. For me, that meant two transformative and visible changes – one, the regulators know their stuff and two, the days of the general lobby are over.
She explained very clearly the logic and structure of the regulatory framework, which will be a combination of basic rules and regulations. While there has been a well-reasoned debate about a principles-based v/s a regulation-based approach, I agree that given our current legal structure, moving to a completely principles-based approach may be difficult. A proper mix of both, supported by facts and data, may be the appropriate approach for now. If our market grows and matures further, leaning towards a principled approach with regulatory modernization may be the right combination.
Furthermore, it was clear that a disclosure-based framework or a combination of principle and regulatory frameworks will not dilute the need for compliance. There would be no compromise on the regularity or orderly functioning of the market and violations would be dealt with appropriately.
A regulatory agency that is aware of its role in nation building, is ready for constructive dialogue, is progressive and focused on market development, is certainly unique. Today, we often refer to international standards for policy issues. With the upbeat attitude we witnessed at the conference, the day may not be far when our regulators will set a global standard that is made in India.
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