Market regulator Securities and Exchange Board of India (Sebi) today said it has framed a new set of guidelines for consent order mechanism and warned that any corporate house, however big it may be, caught for serious misconducts will be severely dealt with as the market is not a 'casino'.
"We have come out with a new set of guidelines for the consent mechanism and if any corporates or individuals, however powerful they may be, are found going against that policy, stern action will be taken against them," Sebi chairman U K Sinha told reporters.
He was answering media queries on what action will be taken against Reliance and Sahara Groups for their alleged market misconduct.
However, Mr Sinha did not name any of these companies, nor did he reveal the changes in the new consent mechanism, but said if any corporate or individual flouts the regulatory norms, stern action will be taken against them as per the law. Consent mechanism refers to settlement of a case dealing with alleged flouting of securities laws without the individual or company involved admitting or denying guilt.
The alleged party gets absolved of the charges by paying a mutually agreed penalty to the Sebi.
"We are taking all possible measures to ensure that nobody is able to avoid the rules of the game, especially on a continuous basis, to harm the interests of the individual and institutional investors," he warned.
"The Sebi is continuously taking measures to improve retail investors' confidence in the equity markets ... the market is not a casino where one can do anything and get away with it," Mr Sinha said.
Mr Sinha, addressing a capital markets summit warned corporates of serious punitive actions against market misconduct.
"Any corporate house, irrespective of its size, not adhering to the regulatory norms and is caught for serious market misconduct will be severely dealt with."
Stressing that the domestic market is well-regulated, he said investors should not worry as the Sebi has the necessary mechanisms to take care of any manipulation.
"I assure you, if there is any attempt to manipulate the market or to bypass the rules, we will take action and with this surveillance mechanism, we are in a much better position to do that today."
Sebi has put up a sophisticated surveillance mechanism which puts out up to 100 alerts a day on potentially fraudulent transactions, he said.
"We have introduced a very sophisticated surveillance mechanism and everyday we're getting hundreds of alerts through a data warehousing system and I would like to assure the investing community that we'll thwart any attempts to bypass the rules of the market," he added.
The regulator recently came out with a discussion paper on a 'safety net' to address the issues vis-a -vis price of IPOs (initial public offers), he said.
About two-thirds of the IPOs that have come up during the past three years have been continuously trading at below the issue price even after the adjustment to general decline in the market, he said.
"I feel a safety net must be introduced in a milder version. The (IPO) pricing has to be right because we cannot expect people to invest in the market when they are losing money at a sharp rate and we'll be taking certain significant measures in this regard very shortly."
Sebi has sought the reasons as to why some independent directors, citing that things have not been going as per standard practices, are silently withdrawing themselves and resigning in an impulsive and haphazard manner, Mr Sinha said.
On the issue of executive compensation, he said short-term interest of senior executives should not guide a company into taking unnecessary risks which precisely has been the problem in many large companies in the past five years.
"Going forward, we think there should be some norms on the subject and that's why we want to set up certain parameters without doing anything in a disruptive manner."
The next Sebi board meeting will be held on January 18, he said.
On the mandatory 25 per cent public float, he said the Government has assured Sebi that listed PSUs will meet the August 2013 deadline to adhere to the compulsory shareholding norms.
Under the norms, privately-promoted companies are expected to have a public shareholding at 25 per cent by June, while the same for the state-run listed firms has been relaxed to 10 per cent, which has to be met by August, he said.
According to analysts, 11 PSUs, including Rashtriya Chemicals & Fertilisers, State Bank of Mysore and HindCopper, among otehrs, have Government holdings of over 90 per cent and the Centre will have to bring it down.