IMF tells Sebi: Adopt reassess and rearm mantra

Sebi must reassess the regulations that govern market intermediaries in the medium term. So says the International Monetary Fund's financial sector assessment report on India, report CNBC-TV18's Sajeet Manghat and Ashmit kumar.

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IMF recommends market regulator Sebi to adopt reassess, and rearm mantra. The IMF's financial sector assessment report says that Sebi's regulatory framework is strong, but must be continuously strengthened, since the regulator faces three key challenges that will impact the effectiveness of its supervisory programmes.
The report recommends that Sebi should focus on tightening supervision towards securities intermediaries, including fund managers and the funds they manage; ensure issuers comply with the reporting requirements; and ensure compliance with accounting and auditing requirements.
The report has also raised questions regarding Sebi's dependence on demutualised stock exchanges for self regulation, in case they list.
It also recommends giving greater autonomy and power to Sebi, whether it be towards criminal enforcement, or being given sole powers to review information submitted by listed entities instead of sharing it with the Ministry of Company Affairs, in cases where the government's authority to give directions to Sebi is treated as the finance ministry having the authority to supersede Sebi's decision in individual cases.
IMF also says Sebi must review its tender offer regulations so that all investors get an equal opportunity to exit. And that while Sebi should continue implementing a risk-based supervisory programme for Mutual Funds, it should also look at expanding the definition of cumulative investment schemes.
The ongoing payment crisis at the NSEL has also not escaped IMF’s attention. The report says Sebi must move to test current default procedures, and develop a plan to deal with the failure of entities other than brokers.