Inside story: Bhave shares the ups and downs of being head of Sebi

Chandrashekhar Bhaskar Bhave is in Cloud 9 these days: Cloud 9 in this case refers to a colony of row houses on Pune's tony NIBM Road where he has moved in, a month after retiring as chairman of the Securities and Exchange Board of India (Sebi).

"I suppose the builder's choice of name was prompted by his desire to get a premium on property rates," Bhave says.

But he is definitely on Cloud 9 mentally.

Bhave, whose three-year tenure was notable, among other things, for pushing the ambit of the stock market regulator's functions, has decided to use the next six months lazing and applying himself to such problems as fixing the kitchen tap - he makes two calls to the plumber during our conversation.

...

"The power of deciding not to do anything is a great privilege," Bhave says, as we settle down at the La Brasserie in Pune's Le Meridien.

As if to underline his self-imposed relaxation, he was casually dressed in a cotton shirt sleeves rolled up and sandals.

Pune will be home just for a year before he settles down in Bangalore (the flat there is in the final stages of construction).

So the buzz about his joining the Sudha Murthy Foundation must be true, we ask. Bhave takes a deep sip of fresh fruit juice and says the reason is far more mundane: his wife wants to be near her two sisters who are settled in Bangalore.

Independent directorships are one option going forward and he has received enough calls from India Inc. But he will take a call on all these options once his six-month deadline is over.

...

Bhave, however, has taken one firm decision already: he will learn at least one new thing every year - a process that started before he retired.

So in the last two years, he has learnt yatching he was good enough to sail from Mumbai to Mandwa and scuba diving (he intends to finish the course, which has to be done in the Andamans, sometime soon).

For this year, he has decided to teach math one of his favourite subjects to students of Class 6 to 11. Rock climbing is next on the agenda.

He opts for the standard five-star buffet, but we notice his bias for seafood. However, he avoids the prawn soup saying the red colour suggests it has too much chilly in it, and goes vegetarian instead.

...

We decide to steer the conversation to something everybody wants to know the inside story of his eventful three-year tenure in Sebi and why he didn't get an extension. What went wrong in his equation with the political bosses?

To our disappointment, the seasoned former bureaucrat refuses to say anything on record: "I can only say that I did not expect an extension of my tenure."

Asked about the Ulip (unit-linked insurance products) controversy he says, "whatever people say about Sebi's stand on the Ulip issue, the fact is that the ultimate result was that investors benefitted from it. That anyway is the market regulator's job. Nothing else matters."

He remembers how he had initially declined the Sebi post since National Securities Depository Ltd (NSDL), when he headed it, had challenged the regulator's order implicating it in an initial public offer scam.

But then Finance Minister P Chidambaram was insistent and a solution was worked out - it was decided that Bhave would recuse himself from the NSDL case.

...

In retrospect, that may have been a mistake, Bhave says, because he never imagined he would be in a situation where he couldn't say a word on the issue, even though everyone else could take potshots at him freely.

"The main reason I took up the Sebi job was my training as a public servant. When the PM or the FM asks you to take up a challenge, it is your duty to point out the difficulties but you simply can't say no," he says.

By and large, Bhave says, he has no quarrel with the political bosses because he understands their compulsions.

"A politician is responsible to his constituency and needs to go back for re-election, while a bureaucrat has no such compulsions. Once you understand the dynamics, everything settles down," he says, preferring to change the subject and talk about some of the high points in his career.

...

He talks about how despite the reservations of the political powers, he insisted on reopening the markets on the second day of the 26/11 attacks and was allowed to go ahead.

After his stand was vindicated (the markets operated smoothly and the indices even went up marginally), he received appreciative messages from politicians.

"If you have the power of conviction and can prove your mettle, no one messes with you beyond a point," Bhave says, adding one has to know how to get out of tricky situations by remaining within the system.

For example, he talks of Satyam's disgraced former Chairman Ramalinga Raju's sensational confessional statement. Raju had emailed the statement to him and the heads of the two stock exchanges minutes before trading was to start for the day.

...

Bhave's first reaction was to figure out whether it was a prank mail and asked the exchange heads to call Satyam's company secretary to verify the authenticity of the mail.

One of the exchange heads then called him to say the company secretary said he was not aware of it. Realising that he had very little time Bhave asked the two exchanges to take turns and call the company secretary every five seconds.

After several such phone calls, the secretary confirmed the authenticity of the mail from Raju, and the exchanges posted the statement on their websites.

The lunch is over, but Bhave is in a mood to talk and orders tea. He recalls how he had asked all institutions foreign and domestic to put up a certain amount of margin money for their trades in the Indian equity markets as Wall Street started melting in 2008.

...

But he got a call from one of the top overseas regulators asking him to make an exception and withdraw the margin requirement for foreign institutions.

But Bhave refused to do so. He is immensely proud of the result of his firmness: The Indian equity markets did not face a single payment crisis during the entire length of the global financial crisis.

Not even after Lehman Brothers filed for insolvency since the margins collected from the institution was used to settle outstanding deals of that institutions.

We ask him why he publicly backed the Bimal Jalan Committee report, which was the epicentre of a major controversy. Bhave says it was a deliberate attempt to create a controversy.

...

"I had only said at a general meeting of the Asia-Pacific Central Securities Depository Group that profit maximisation for market infrastructure institutions should not be encouraged. Stocks exchanges have a regulatory role and there will be a conflict of interest, if they try to maximise profits," he adds.

But doesn't he feel hurt by the whispers about his affection for the National Stock Exchange (NSE)? For once, Bhave looks annoyed, and says he has heard these insinuations for long, but no one has ever pointed out what precise favour he did for NSE.

"I agree I have not been able to counter this whisper campaign against me effectively," he says.

He gives the example of May 2008 when currency derivatives guidelines were released. The fact that MCX-SX was allowed to trade currency futures is proof of the fact that he encouraged competition.

Sebi could have denied approval on the grounds that MCX-SX's shareholding did not follow the guidelines. But he gave the exchange two years to comply.

...

Sebi could have denied approval on the grounds that MCX-SX's shareholding did not follow the guidelines. But he gave the exchange two years to comply.

As we wait in the foyer for his Toyota Corolla Altis to drive him back to Cloud 9, Bhave says he hopes the conversation we had was worthwhile enough for us to drive down from Mumbai to meet a "retired IAS officer", and then proceeds to answer it himself: "The return on your investment would perhaps have been much more if you could write the juicier part of the inside story".

The former Sebi Chairman has clearly not lost his sense of humour.