Holding her own: Madhabi Puri Buch completes 100 days as Sebi chairperson

Industry players credit Sebi's first woman chairperson with putting special emphasis on cyber security, use of tech and data - areas where Sebi is trying to 'stay ahead of the curve'

Madhabi Puri Buch completed her first 100 days as the chairperson of the Securities and Exchange Board of India (Sebi) on Friday. A whole-time member of Sebi from April 05, 2017, to October 04, 2021, Buch had assumed charge as Sebi chairperson on March 2.

During this hundred-day period, the first woman and first person from the private sector to head the market watchdog, has tried to put in place key building blocks for efficient development of the securities market. The IIM-Ahmedabad alumna has attempted to inculcate the efficiencies of the private sector by identifying key result areas (KRAs) and setting target-oriented goals for various departments at Sebi.

Buch has introduced a system whereby an individual from each department has been assigned to focus only on facilitative and developmental policy work. The personnel have been tasked with going to industry, gathering feedback, and setting long-term development agenda to boost the market ecosystem.

In recent years, Sebi has adopted an approach of extensive market feedback on any key policy changes. To further underpin this approach, Sebi, under Buch’s leadership, is in the process of setting up two new committees — one on foreign portfolio investors (FPIs) and the other on hybrids like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs).

Buch, who has previously worked as an investment banker, has also floated discussion papers around pre-filing of IPO documents, which will give issuers more flexibility and secrecy around timing their issues. Also, on easing pricing norms for disinvestment in PSUs, which will potentially boost the government’s disinvestment drive.

Sebi is also working on various initiatives for the development of the bond markets — which has remained a pipe dream so far for the regulators and the government. Further, the regulator has shown alacrity in use of modern technology such as blockchain, for covenant monitoring, and use of sophisticated artificial intelligence and machine learning to crack down on serious market offences such as insider trading and front-running.

Buch has also sought more powers from the government to intercept data on social me­dia platforms such as WhatsA­pp and Telegram, to crack down on insider-trading cases.

The regulator has also been quick on its feet after allegations of front-running emerged at Axis Mutual Fund by launching search-and-seizure operations across multiple cities, and when unsolicited SMSes surfaced advertising the Patanjali Ayurved-promoted Ruchi Soya follow-on public offering (FPO). In an unprecedented move, Sebi directed the company to give an exit option to investors who participated in the FPO.

In another instance of acting fast, Sebi announced a tweak in the IPO payment process within weeks after disparity emerged in the way retail and non-retail applicants submitted their bids during LIC’s maiden share sale.

Market observers say Sebi, under Buch, has put the onus on market intermediaries to make changes to their system rapidly in order to become more efficient and meet evolving market dynamics. The change to the IPO payment process was one such example, they say. In April, fund houses were directed to pause new fund offers (NFOs) until they were ready with the new system to prevent pooling of investor funds. Buch has also been pushing clearing corporations and custodians to remove key irritants to ensure a smooth transition to the new T+1 settlement cycle.

Last month, Sebi also introduced radical changes to the fr­amework on passive investing based on recommendations of a working group. Many industry players welcomed the chan­ges aimed at developing the Rs 5-trillion passive fund industry.

Buch has also shown that she is ready to take a more flexible stance when required. In May, Sebi made several regulatory relaxations to allow state-owned LIC to launch its IPO in challenging market conditions with just 3.5 per cent free float. Sebi also relaxed the norms for calculating peak margins by brokers after industry players highlighted certain difficulties.

Industry players say Buch has put a special emphasis on cyber security, use of technology and data — areas where Sebi is trying to “stay ahead of the curve”.

Changes afoot

• Appointing an official in every department to gather investor feedback

• Focus on quality of output to boost productivity

• Revamping and setting up key Sebi committees

• Framework to boost cybersecurity 

• Seeking new powers to comb social media in order to prevent insider trading

• Using sophisticated software and taking a data-driven approach

• Cracking down on front-running cases

• Acting against circulation of unsolicited investment through social media

• Providing the exit option in Ruchi Soya FPO

• No relaxation in related-party norms despite corporate lobbying

• Ban on MF NFOs until new system around pooling of funds is ready

• Search and seizure in Axis MF front-running case

• Upfront payment for IPOs for all categories of investors

• Holding ground on transition to T+1 despite FPI concerns

• Waiving key regulatory requirements for LIC IPO

• Relaxing norms for computation of peak margins by brokers

• New framework to develop passive funds

• Canada FPI controversy; signing of MoU with the Manitoba Securities Commission, Canada