Damodaran warns of investor focus dilution

SEBI EX-CHIEF ON SECURITIES MARKET CODE

- KHUSHBOO TIWARI

As the Securities Markets Code (SMC) Bill moves to the scrutiny of a Select Committee of Parliament, former Securities and Exchange Board of India (Sebi) chairman M Damodaran (pictured) has raised concerns on the Code shifting the regulator’s investor protection focus from the Sebi Act’s preamble to a ‘mere’ clause, and cautioned about prospects of the market regulator becoming ‘top-heavy’ and reliant on ‘delegated legislation’.

While he commended the consolidation of three different Acts to ‘eliminate conceptual confusion and overlaps’ without any ‘major disconnect’ from what the Code sought to achieve, and lauded its focus on simplification, honest conduct of business, and removing ‘procedural and substantive cobwebs’, Damodaran said some aspects of the Bill merit closer attention.

“The preamble of the Sebi Act, 1992 was more focused, in that it specifically referred to the protection of the interest of investors, the regulation of the market, and the development of the market. This seems to have been shifted to Clause 11(1). Moving this principal objective from the Preamble to a mere Clause seems to be inappropriate,” he said in the newsletter of his corporate governance firm Excellence Enablers.