Capital Markets: Challenges and Developments

House Panel includes SEBI review in agenda, likely to summon Buch 

Explained | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Market Economy; SEBI; Public Accounts Committee (PAC)

Mains level: Market Economy; Issues related to regulatory bodies;

Why in the News?

The Public Accounts Committee (PAC) has included a review of SEBI’s performance, amid political controversy surrounding chairperson Madhabi Puri Buch following Hindenburg Research’s allegations.

What are the allegations against SEBI?  

  • Conflict of Interest: SEBI chairperson Madhabi Puri Buch faces conflict of interest allegations due to her past ICICI Bank role amid Adani investigations.
  • Toxic Work Environment: Reports have surfaced from approximately 500 SEBI employees claiming that the work culture at the regulatory body is “toxic and fearful.” This has led to demands for an impartial inquiry into the alleged workplace issues and the overall management of SEBI.
  • Response to Allegations: Buch and SEBI have denied wrongdoing, asserting that all necessary disclosures and recusal norms have been followed diligently.

Significance and Functions of the Public Accounts Committee (PAC)

The PAC was introduced in 1921 after its first mention in the Government of India Act, 1919 (Montford Reforms).

  • Oversight Role: The PAC serves as a parliamentary watchdog for government spending, ensuring accountability and transparency in the use of public funds. It plays a crucial role in auditing the revenue and expenditure of the government.
  • Review of Regulatory Bodies: The PAC has the authority to review the performance of regulatory bodies established by the Act of Parliament.
  • Suo-motu subjects: The PAC can select subjects for in-depth examination beyond the standard audit reports, allowing it to address pressing issues that may arise in the public interest, such as the allegations against SEBI’s chairperson.
  • Advisory Role: While the PAC can make recommendations based on its findings, it does not have the authority to enforce compliance. Its recommendations are advisory in nature.

How SEBI can improve its regulation considering recent challenges? (Way forward) 

  • Enhanced Disclosure Regulations: SEBI has already made progress with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2023, but further refinement is needed.
    • It should focus on clarifying the scope of disclosures required from companies, particularly regarding financial irregularities and conflicts of interest.
  • Bolstering Whistleblower Protections: SEBI should strengthen its whistleblower protection framework to encourage the reporting of internal issues or malpractices, ensuring accountability and protection for informants.
  • Improving Internal Governance and Work Culture: SEBI can address concerns about a toxic work environment by conducting independent reviews of its internal governance, improving employee welfare, and fostering a transparent, positive work culture.
  • Collaborating with Global Regulatory Bodies: SEBI can work more closely with global financial regulators to align with international best practices and enhance cross-border market oversight, ensuring that India’s markets remain resilient and transparent.

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