Amendment to SEBI Act, stock price inc artifical

New Delhi, Oct 27: Securities and Exchange Board of India (SEBI) Chairman M Damodaran says that a comprehensive amendment to the SEBI Act is on the anvil giving more power to the capital market's regulator and is of the view that there was an element of artificiality in the rise of some stocks listed on the BSE Sensex.

''There could be changes in the judicial process under the SEBI Act, besides, an increase in fines on errant companies,'' Mr Damodaran said addressing an audience here last night on 'Potential Strengths of Indian Capital Market and Blueprint for Future'. The event was organsied by the PHDCCI.

Mr Damodran said amendments to the Act would also effect changes in the settlement process.

He said the existing legislation requires registration of sub-brokers be done by SEBI. The amendment would hive off this provision to the exchanges, Mr Damodran said.

The SEBI Chief announced that a Self Regultory Organisation (SRO) for the surveillance of the bourses is on the cards. This will entail setting up a body of market experts, industry representatives and those from Asset Management Companies (ARC), mutual funds, and retired members from the Regulatory body.

Mr Damodaran said certain provision on policy, such as caps on FDI, bring about an artificiality in stock prices. He said often it was the case that too much money chases too few stocks and results in phenomenal price increase of a stock. The answer lays in having many more big issues and larger listings by companies from overseas stock markets. This listing should not be just confined to developing countries, but must involve many more corporates from the industrialised world.

''The price of a stock is a result of demand and supply,'' Mr Damodran remarked and admitted that the bellweather BSE Sensex was not a true reflection of the situation relating to all the stocks in the stock markets.

Mr Damodaran's remarks on artificality in stock prices came in response to a question from Former PHDCCI Chairman K M Memani that another stock scam could be in the offing as only a few stocks were recording an abnormal rise, some of whom find a place in the SENSEX.

Mr Damodaran said the term of the Self Regulatory Organisation (SRO) has not yet been decided, but it could be three to five years. He said SEBI was working on simplification of procedures relating to rights issues and added that the regulator would make the announcement about the new norms soon.

On the high cost of compliance, Mr Damodaran said instead of making disclosures to BSE, NSE and SEBI, the regulator was working on uniform e-filing of disclosure details.

"This way, while compliance is not diluted, its cost is minimised," he said.

Mr Damodaran said SEBI was also working on establishing a stock exchange for Small Scale Enterprises.

The SEBI Chief favoured fewer stock exchanges and existence of only those that were viable. He was of the view that bourses need to follow proper accounting standards.

Mr Damodaran said SEBI was working on development of the corporate bond market in close touch with RBI. In this regard, the Report of the official Committee on Corporate bond market was serving as a guidepost, he said.

The SEBI Chief denied any differences with the RBI on the approach to the development of corporate bond market and added that the common goal of both the regulators was to develop a "vibrant corporate bond market" catering to the future financial needs of the country.

UNI