SEBI, India’s securities regulator, will soon enter into a Memorandum of Understanding with the Commodity Futures Trading Commission for a broad based cooperation in enforcement and for exchange of information. A similar MoU with Mauritius has almost stopped traders from routing money earned through improper market practices via Mauritius. This will be the fifth bilateral MoU of the regulator.

SEBI has issued a report to discuss enabling Indian issuers simultaneous access to domestic and international equity markets. Though the regulation of the securities markets in India is fundamentally similar to that of most developed countries, there are certain problems which would make a simultaneous issue impossible. Some of the problems include differences in accounting and disclosure treatment, presentation and format of prospectus, material differences in bidding processes and different trading mechanisms.

Some regulations exist which make it impossible to comply with the laws of both countries simultaneously inviting special permissions and time lags. The report seeks to identify problem areas, procedural and regulatory, which are roadblocks to such a simultaneous listing.

Exchange traded Interest Rate Derivatives contracts were launched on the National Stock Exchange on the 24^th of June, 2003. Futures contracts on a notional government security with a 10 year maturity and a notional treasury bill with a maturity of 91 days were introduced. This was the first time that exchange traded financial instruments which are not based on securities were introduced in the markets. The products will be traded alongside the equity products by the two leading exchanges of the country. Broadly, the regulatory structure of the equity derivatives would be applicable. The products would be regulated by both the securities regulator and the central bank.

SEBI proposed setting up a securities ombudsman for resolving disputes between market participants and other entities. The alternative redressal mechanism is expected to reduce delays, costs and unnecessary procedure in resolving investor grievances. Since the regulator, only governs listed companies, by virtue of the delegated powers, the improved redressal would be available only in respect of listed companies.

P. H. Parekh & Co. conducted a survey of CEOs and MDs of over 120 Indian companies to quantify how the newly recommended standards and recommendations of corporate governance are perceived by corporate chieftains (as opposed to investors’ perceptions). The results of the survey were surprising because of the large number of chieftains not finding the regulations burdensome. Not only do they face additional scrutiny but there is an increased likelihood that they will have to shell out additional funds in compliance costs and face reduced control over their companies since more power would flow to independent directors, audit committees etc. This is complimented by the higher probability of prosecution for errors of process e.g. not having processes in place for prevention of insider trading.

There may be two reasons why top managers want more regulatory scrutiny rather than less. First, the CEO/MDs are not responding to the survey in their function as heads of those businesses but in their role as investors in other companies. The other possible explanation is what is known in economics as the "market for lemons". In a world replete with fraud, investors in companies will not believe a company. They will assume that all companies are infested with fraud and self dealing. Share of good companies thus will not be able to trade and even if they do, they can only get bad firm prices. Thus managers of good companies would try to reduce fraud and thus get better valuation for their companies.

The Securities Appellate Tribunal in NEPC v. SEBI ruled that the regulator could mandate prohibition of accessing the capital markets for a period of five years and such a ‘direction’ of the regulator was remedial and not penal in nature. This ruling was made in the context of the deliberate violation of the takeover regulation and thus barring the violators and their closely held companies from accessing the market was in furtherance of the purpose of protecting shareholders in the market.