False disclosures give false sense of information which distorts reality: SEBI chief

SEBI plans robust system to prevent cyber frauds, market manipulation, and ensure market integrity through technology and awareness.

To protect investors from cyber frauds and market manipulators, the Securities and Exchange Board of India (SEBI) is planning to put in place robust system in coordination with investigative agencies which will go live soon. The regulator is also working to put in place a specific system wherein when investors are putting money through UPI, it will only go to the registered bank accounts thereby preventing fraud, SEBI Chairman Tuhin Kanta Pandey said in an exclusive interview with The Hindu. Edited excerpts: 

At least from the compliance point of view there was a closure for my predecessor, because these were personal allegations. But you are right in saying that the chairperson represents an institution, so I would always feel that everyone in the institution right from the chairperson down to a single officer who is working with SEBI is above board. From the institutional perspective our effort should be always there.

We want to make it very clear that being a market regulator we are responsible for market integrity. We want people to work with integrity. All investors should be rightly be placed to the extent possible, on an equal footing and no body must be trading based on unpublished price sensitive information.  

When one can make more money than others [through the price sensitive information] it would spoil the integrity of the market and that was the a very fundamental principle. We have people who are trying to do the pump and dump kind of operations. That’s an impious behavior. Recently we had passed an order on spoofing and we found that the people are spoofing, giving a dodge, so there are different kinds of market manipulations, some are standardised. People are quite creative and innovative also to keep on creating some of the other manipulations which I think it would be our effort to curb it by investing both in terms of human resources and technology. Combined with our intent, we intend to really see that the surveillance and enforcement continues to be on our radar always.

Yes, I think our efforts should always be to do that. Sometimes it may be possible, sometimes it may not be. I think there are many players including board of directors, independent directors, and auditors. All of these things are there to see that that things do not come to that level because after all, we cannot be in every boardroom. Disclosures are there. So false disclosures have to be caught. Auditors have to see what’s going on. Independent directors also see the going on but still some egregious behavior comes and then it ends up in that situation.

I would say it is not a general phenomena. After all, you build businesses and the businesses might go wrong also sometimes, risk that equity holders shareholders always take and is the nature of the market but you have to have an honest intention. The intent is very important. But fraud and falsification are unacceptable. Particularly in a market situation where we have many rules and regulations, many more players. There I think, sometimes you have to come in very hard. In case of IndusInd, we came out with an interim order.

Normally we would have gone for a show cause. But there are certain things which need to be prevented because  time is of essence, market is always playing and the investigations do take time. We are able to at least prevent the things. In many cases, we would like to give an opportunity to the person and then come to a final conclusion like in the case of Gensol. That had to be done because it was discovered that there was so much of lenders’ money was getting diverted. In fact, the lenders should have been more circumspect. This is a role that the company should play. So I think when they fail we have to do that. It is something that we don’t feel happy about but we have to do it.