SEBI might be the Indian counterpart of Security Exchange Commission or SEC of the US, yet SEBI rather has a long way to go to even become a shade of SEC in terms of stringency. SEBI at best is a watchdog which doesn’t know how to bite. SEC, on the other hand, doesn’t even care two hoots as to who has what political contacts or lobby when it comes to crushing fraudulent companies. Remember what SEC did to Enron and Arthur Anderson? The problem with SEBI is that it acts more as a prosecuting agency rather than an enforcing one. Whenever a scam happens, fingers are pointed at auditing companies and not at stock market regulators. Ironically all these manipulations do happen to take advantage of the lacunae in the legal systems that govern stock trading in India. Take for instance Satyam, where the blame went to PwC that had little role to play as it was bound by Non-Disclosure Agreement. However, the role of auditor can be enhanced if it is allowed to report to the regulatory body directly, which is now confined to just the company’s board. Alternatively, one can think of replicating France and Denmark’s model of ‘dual auditing pattern’ or a system of joint auditing. On this Sudhir Gupta, Consultant, Planman Group suggests, “SEBI should have some kind of moral responsibility. Whenever there is a scam or fraud, SEBI’s top brass should voluntarily go ahead and resign. The authorities in charge should do so taking a hint from our ministers and leaders who do the same whenever they are alleged with criminal or corruption charges”. At the least, SEBI should copy the way SEC functions & have power to raid, search and seize, if it senses any abnormal activities. Presently, SEBI does not have any such powers. But until the government endeavours to structurally change SEBI, it’s only a matter of time before the next Satyam happens.
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