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The Securities and Exchange Board of India (Sebi) says it will mark the current financial year with initiatives to protect investor interest, strengthen the regulatory mechanism and make markets and intermediaries more efficient.
The proposals include enhancement of Sebi's surveillance mechanism, creating a forensic accounting cell, audit systems for exchanges, an exit policy for de-recognised exchanges, extension of call auction mechanism for Initial Public Offers (IPOs) & illiquid stocks and using professional firms for investigation.
On Monday, the regulator unveiled broad initiatives proposed for 2011-12. These were part of a memorandum to the Sebi board ahead of its earlier meeting on March 25, the first with U K Sinha as chairman.
While a final decision has yet to be taken on the proposals, the fact that it is before the board implies a decision could be expected in the coming months.
"While continuing efforts to pursue its three mandated statutory objectives, it is proposed to have special focus in 2011-12 on investor awareness and education, surveillance of markets and building HR (human resources) capability of Sebi, as well as the market," says the Sebi note.
Developing wide and deep markets would continue to be a priority area, it added.
Surveillance
Surveillance is a thrust area identified by the regulator as part of its responsibility for protecting investor interest and, at the same time, developing the markets.
Sebi proposes to enhance its existing IMSS - Integrated Market Surveillance System - infrastructure and build a team of analysts to track sectoral indices.
IMSS allows the regulator to key in various parameters to identify suspicious transactions.
To improve the quality of financial information disclosed and to assist in detection of irregularities, Sebi will create a forensic accounting cell that can serve as an effective early-warning mechanism.
This assumes significance when seen in the light of a statement made by the US Securities and Exchange Commission on April 6.
The US regulator said investigations revealed the audit failures at Satyam Computers by the Pricewaterhouse (PW) India affiliates were not limited to that company but indicated a much larger quality control failure through PW India.
The regulator will also use the latest software tools and hire services of professional firms to boost investigation activity.
It will also set up an investigation laboratory that can be used as an "incubation room" for innovation in investigative methods.
"Recent experience and trends in the type of investigation cases undertaken by Sebi indicate that technology and newer methods are being used by violators of securities law," notes the Sebi paper.
It intends to implement a Data Warehousing and Business Intelligence System. The system is expected to generate reports that will better serve Sebi to identify, detect and investigate aberrations and abuses that undermine market integrity, says the note.
Meanwhile, Sebi staff members at all levels will be subject to technical and behavioural training.
Market intermediaries
Sebi will review the ownership and governance of market infrastructure institutions. These include stock exchanges, clearing corporations and depositories. These issues were covered by the Bimal Jalan committee.
Sebi also proposes to extend the call auction mechanism to IPOs and illiquid scrips. It will also look into an exit policy for de-recognised stock exchanges or those that have sought voluntary de-recognition.
In the derivatives space, the regulator will put in place risk management measures on volatility and introduce derivatives for hedging interest rate risk.
Empowering investors
To scale up investor awareness and education, Sebi intends to put in place a toll-free helpline number for grievance redressal, apart from a centralised web-based grievance tracking system.
Financial education programmes for school children and workshops across the country are part of the proposals.
Meanwhile, Sebi has predicted a budget deficit of Rs 40 crore (Rs 400 million) for financial year 2011-12. Last year, the board had a surplus of Rs 150 crore (Rs 1.5 billion).
The revenue expenditure during 2011-12 is estimated at Rs 160 crore (Rs 1.6 billion), an increase of 8.7 per cent from the revised revenue expenditure of the previous year.
