In the past 15 days, Securities and Exchange Board of India or Sebi has issued one circular and one discussion paper which is not directly connected to easing the financial hardships of market participants, during the lockdown. It had issued final orders in the two-year-long “WhatsApp leaks case” and, in a rare instance, slapped penalty on government-owned National Highway Authority of India (NHAI) for inadequate disclosures.
From 25 March, when the lockdown began, till the last week of May, the market regulator was on an alert mode. All its energy and manpower were focussed on relaxing compliance requirements for regulated entities, streamlining rating norms in line with reliefs announced by Reserve Bank of India (RBI) and on surveillance as the markets during this period remained highly volatile.
Traders and brokers, for the first time in the history of equity markets, were trading from home. Sebi had an added responsibility to ensure that these trades happen without data breaches, manipulation and glitches.
Sebi kept margins considerably high for highly volatile stocks and reduced market-wide position limits for such scrips. It did not ban short-selling — an act of selling a stock that a seller does not own — but restricted it for index derivatives. These steps aimed at curbing volatility succeeded in reducing speculative trades.
In these unprecedented times, when the country was under a lockdown, markets continued to trade, and the regulator had pushed everything that was not urgent for later.
“In the initial days only about 10-20% of work staff was coming to offices. Rest were working from home. Despite quick solutions to enable work from home for Sebi officials, it required a bit of adaption. So the focus was only on urgent matters, relaxations, robust market surveillance in consonance with exchanges,” said a Sebi official.
During these times, the market regulator issued 40-odd circulars to ease hardships faced by capital market participants in meeting compliance requirements during the covid-19 lockdown. The regulator had eased several norms on almost all aspects, including allowing participants to trade from home, easing fund raising norms, complying with KYC requirements, relaxing registration timeline, extending timelines to comply with norms, and reducing the holding of unlisted debt to 10% in debt mutual funds.
Sebi also stepped in to direct Franklin Templeton India to focus on refunding investors whose money was stuck in the fund house’s six shuttered schemes. The regulator also provided an alternate exit mechanism for unit holders, mandating that units of schemes under winding down process should be necessarily listed.
The market regulator also proposed that investors, ready to infuse large amounts in select stressed companies, may not need to make an open offer and such companies could price their preferential issues under easier norms.
“This proposal is likely to be cleared by Sebi board later this month. This will be first time the board will meet in these covid-19 times,” said the Sebi official quoted earlier in the report.
With the economy beginning to resume its regular functioning, Sebi’s operation is also returning to normalcy. Agendas, proposed norms and investigations which were put on the backburner during the lockdown are now back in focus.
Sebi imposed a fine of ₹15 lakh each on two senior employees working at Antique Broking for their involvement in the WhatsApp leaks in the last week of May. This was a culmination of a nearly two-year-long investigation into alleged leak of financial results of companies before they are made public. These two individuals were guilty of sharing messages that included result predictions of several blue-chip companies, including Axis Bank, Asian Paints, Wipro and Mindtree.
On 1 June, Sebi issued a panel report on the idea of social stock exchanges, floated in Budget 2019. While the report was in the last leg of deliberation, the release was postponed in January and February. It was released only with the contemporary commentary on easing fund raising for social welfare and non -profit organisation.
On Friday, Sebi issued a circular announcing ways in which financial technology firms could find innovative solutions for the stock market ecosystem by testing on actual customers without hassles of registering in a controlled environment. The idea of the “sandbox” was floated in May 2019 and cleared by Sebi board in February 2020.
