A Humanitarian Regulator

While the COVID-19 pandemic brought with it a sense of impending doom, it also taught us that rays of hope can stream in from unexpected crevices. The Securities Exchange Board of India (SEBI) emerged as one such ray for thousands employed in companies dealing with the Indian capital markets.

The regulator came up with relaxations in strict statutory requirements to ensure that the lives of those engaged in the industry were not at risk. At the same time, SEBI ensured that businesses kept operating while maintaining high ethical and professional standards required for an industry that is tied closely to the financial integrity and security of the nation. The credit for such initiatives goes to chairman Ajay Tyagi. A 1984 batch IAS officer of the Himachal Pradesh cadre, Tyagi is currently on an extended term as SEBI chief.

Industries often face crises due to changes in statutes or technology. However, an unprecedented crisis calls for unorthodox solutions. For the capital markets, bureaucracy and technology emerged as tools to deal with the COVID-19 crisis.

A large part of the extraordinary buoyancy of the Indian capital markets in current times may be credited to the times when SEBI stepped up to play its part as a humanitarian regulatory body. Times when its sole intent was continuation of business without overlooking lives — all while preserving the integrity of the industry. Simple as it sounds, the modus operandi for execution of such a task requires adherence to security measures and vigilance to ensure that the trust of investors does not get breached even while operating during lockdowns.

Tyagi understood how delicate the situation was and as part of its initial measures, eased the process of KYC (Know Your Customer). This enabled the common investors to participate in the stock market without compromising their health safety.

Dealing rooms of private mutual funds and similar offices had become another cause of concern and were looked at as dangerous sites of operation during the pandemic. These were enclosed spaces where multiple fund managers worked in silos. The Association of Mutual Funds of India (AMFI) had approached SEBI, raising concern about the situation and requesting it to allow the mutual fund dealers to work from alternative sites, including their residences. SEBI had allowed the dealers to operate from locations other than the dealing rooms but under strict guidelines and caveats.

The dealing room operations also happen to be the most sensitive ones in terms of the security and the surveillance required to vouch for the integrity of trade executed by the company. Under normal circumstances, unauthorised personnel, who could even be the company’s senior management, aren’t allowed to enter the dealing room. The personnel entering the room are not allowed to use phones and multiple cameras, placed at various angles, would track every move of the personnel working in the room.

A senior executive of a mutual fund, on condition of anonymity, revealed that SEBI had their dealers install cameras in the room of their workstation to keep a record of their activities while executing trades.

“The dealers had to behave in a manner as if they were in the dealing rooms of their offices to ensure the sanctity of the trade,” the executive said.

Mutual funds and Registrar and Transfer Agents (RTAs) were either operating through skeletal staff or had their offices closed. Such a situation resulted in delayed publication of daily NAVs (Net Asset Values) and physical transactions, including dispatch of cheques for redemption and dividend payments. SEBI relaxed certain norms in order to accommodate the challenges in executing business while pushing for the adoption of digital means of transaction by the customers.

Taking note of the limitations of the companies regarding lack of office staff and regular access to office premises, SEBI had also extended the dates of many filing and declaration norms so that the concerned private companies’ employees wouldn’t have to breach the protocols of social distancing and home quarantine.

On November 18, the Nifty index closed at 17,764, with almost a 27% surge year to date. Also, more and more retail investors are coming to the stock market to fulfill their investment aspirations. It is now easy for the common man to open a demat account and transact online using a mobile phone. New-age brokerage firms and fintech unicorns are emerging in the market because of the increased number of customers and volume of business.

This kind of expansion of the capital markets would not have been possible if the regulator had insisted on sticking to draconian practices that would not have been feasible during the time of the COVID-19 crisis. Under the leadership of Tyagi, SEBI opened itself to exploration of newer tools like digital KYCs, put thrust on online transactions, allowed operations from remote locations while using technology to maintain the sanctity and security of norms and procedures and accommodated newer modes of interaction between the investors and the industry, and between the regulator and the industry. All these and more not only served to save human lives but also placed the Indian capital markets on a new trajectory of growth.