Indian Regulator SEBI ignores Key Concerns as it Chides Investment Banks over Trivial issues

India’s Stock Market Regulator SEBI has castigated the investment bankers for giving investors the short end of the stick.The regulator accused the I-Banking community of only looking out for the interests of the promoters by pricing primary issues too high.The proof is in the fact that 62% of the IPOs in the last 3 years are trading at below issue price despite the fact that Indian markets are near an all time high.Bad practises such as  charging zero fees from big band government divestment,unethical if not illegal promotion of IPO companies through planted ads in newspapers were some of the other things that SEBI found objectionable.

Sebi red flags IPO pricing, zero fees – Rediff

The Securities & Exchange Board of India (Sebi) pulled up investment bankers for holding the interests of promoters above those of investors. “If you look at maximising the price for promoters, then obviously you are not looking after the interests of investors,” said Sebi Chairman C B Bhave. Sebi’s concerns on IPO pricing were further corroborated by a report released by CARE Ratings. Analysis of 116 IPOs between August 2007 and August 2010 revealed that “about 62 per cent of IPOs are currently trading lower than the IPO price band”. Citing a survey conducted by Assocham, the report stated: “A majority of CEOs and CFOs attributed the lukewarm response to IPOs to bad pricing and weak market sentiment.”

Bhave also expressed reservations on investment bankers quoting near-zero fees to bag divestment issuances. “(Investment bankers) need to introspect whether it is healthy competition,” he said. Bhave added that in some issues, bankers “outbid each other (by) working for free”.Reports suggest that six banks quoted a fee of Rs 12,500 to manage the Coal India IPO that will raise around Rs 14,000 crore.

SEBI Reluctant to Address Key Concerns

However the Stock Market Regulator missed on touching key issues such as manipulation of small cap IPOs,pump and dump schemes etc.The Stock Market Regulator  has also itself been under fire for being partisan in its treatment of National Stock Exchange (NSE).Another bourse the MCX has accused SEBI of  serving the monopoly interest of NSE by denying stock trading rights to other newer exchanges.There seems to be some truth in these allegations as there have been no big prosecutions in India despite some blatant cases of stock market manipulation.Big Brokers and Market Operators have pretty much of a free reign in the Indian markets.A lot of the money entering the Stock Market from the FII route is said to be illegally stashed black money of corrupt rich Indian in foreign banks.These are some of the key concerns which the SEBI seems reluctant to look into.

Sebi tricked us, claims MCX-SX –  BS

Just days before the court-mandated verdict on its application for a stock exchange licence, the MCX Stock Exchange (MCX-SX) has accused Securities and Exchange Board of India (Sebi) of blatant favouritism and “tricking it with ulterior intent”.

In a strongly-worded letter to Sebi dated September 16, MCX-SX has questioned Sebi’s motive in opposing its capital restructuring plan. “The real question Sebi has to answer is that if they had such serious reservation to the scheme of reduction of capital and issuance of warrants, then how can Sebi justify its own role in first prompting the scheme through its executive director (J N Gupta) and later its chairman expressing no concern or reservation?” the letter asked.

The MCX-SX letter states that Sebi’s delay in approving its application for other segments on the pretext of warrants, “gives an impression that the applicant has been tricked into this situation with ulterior intent”.

Despite the fact that the entire scheme was suggested by Sebi on October 5, 2009, the MCX-SX letter continues, Sebi has raised issues almost a year after MCX-SX approached the Bombay High Court. “The silence of Sebi, despite having full information since October 5, 2009, appears to be with design of damaging the applicant’s business and reputation. The advantage of this delay and the damage to our business and reputation is only to NSE,” it stated.