Gossip & Tales: Inside Sebi

Welcome Promotions
In 2020 GP Garg's appointment as ED had sparked strong protest from SEBI employees association. They had objected to the practice of appointing outside persons or those from non-core streams by sidelining general stream officers in ED level promotions. For the first time, SEBI's Chair, Madhabi Puri Buch, has appointed three 'acting' Executive Directors (EDs) to replace the outgoing EDs GP Garg, Murlidhar Rao, and BN Sahoo, who are set to retire soon. The newly appointed acting EDs, Maninder Cheema, N Hariharan and Jeevan Sonparote, will hold office until full-time appointments are made. This unprecedented move has stirred the pot, especially with Cheema’s (deemed) promotion raising eyebrows within SEBI. Cheema, the Head of the HR Department, was notably a prominent leader in the employees' union that protested last month against what they alleged to be the "unprofessional work culture" under Buch’s leadership. In a display of collective strength, SEBI officials in grades A to C had gathered for a silent protest at the regulator's head office in Mumbai on many issues, including the newly launched digital management information system (MIS) for key result areas (KRAs). Whispers and murmurs among the rank and file have picked up after the promotions.

Interestingly, just last month, SEBI issued a circular attributing the unrest among its employees to “external elements,” and vowed to resolve matters internally. That circular was quietly withdrawn two weeks later, and the promotions were announced in a sudden internal communication. Although the interviews for these promotions likely occurred well in advance, the timing of the announcement, following employee unrest, has led to speculation about the motivations behind these decisions. There are talks about a pending complaint against one of the SEBI officials at the Ministry of Finance for violating SEBI Employee Service Regulations with regard to circulating a press release that was a clarification on the personal allegations against the SEBI chief.

Pay Grade Matters
Protests at SEBI have left many IAS officers and bureaucrats sulking in New Delhi. This since a press release (PR) by SEBI amidst the protests had highlighted that its employees "at the starting level" were earning more than most high ranking Babus and yet demanding Rs 8 lakh more annually.

"To believe that they are being 'underpaid', even at a cost to company (CTC) of Rs 34 lakh per annum and that it would be in their interest to use issues of work culture to bargain for monetary benefits and to believe that they should get automatic promotions," SEBI's PR had revealed. The PR was later withdrawn since SEBI said it will amicabilly resolve the issues of protesting employees but the figures mentioned in it caught the immagination of New Delhi's bureaucrats. Cabinet secretary, the highest ranking bureaucrat in the country, has a salary of Rs 2.5 lakhs (of course excluding other allowances) as per the 7th pay commission. But the view in the regulatory organisations in Mumbai is that even though the IAS officials may envy Sebi officials, 'Perks of the Power' that India's bureaucrats have achieved is the envy of India's most paid corporate honchos.

Leadership Under Scrutiny
Meanwhile, things have calmed within Sebi’s plush BKC headquarters after a turbulent period of employee protests and public controversies surrounding Buch’s leadership. However, Buch’s future remains uncertain. Her term ends in March 2025, and speculation is rife that she could be the shortest-serving SEBI Chairperson in over a decade if the government does not grant her an extension. Past two SEBI chairs have served for at least five years. In the last three years, SEBI’s inconsistent approach in enforcement orders and frequent changes in policies have come under severe criticism. High Courts and SAT have also found SEBI to be “obstinate” and acting in “judicial indiscipline”. Often there is a demand to put regulators to accountability on its finances and performance.

The political attacks from the opposition, which centered around allegations of conflict of interest, have also notably diminished after SEBI softened its stance in the NSE co-location scam, a relic of the Congress era, citing “lack of evidence.” Rumors persist that figures like Dinesh Khara (former SBI chairman), DEA Secretary Ajay Seth, and other high-profile IAS officers are being considered as potential successors. The government’s decision on whether to offer Buch an extension, or move forward with an “acting chief,” could set a new precedent.

The Game of Sentiment and Surveillance
SEBI’s additional and graded surveillance mechanisms (ASM & GSM) have come under fire for stifling investor interest in listed companies, particularly those subject to these restrictive frameworks. Stocks under surveillance face trading curbs that can last for months, limiting intraday trading and restricting gains, thereby discouraging large institutions and sovereign funds from investing. These curbs carry a stigma, deterring institutional investors, which in turn affects a stock’s attractiveness in the eyes of mutual funds and institutional investors.
 

So far, government-owned companies (PSUs) were exempt from these surveillance measures. But last week, a circular from the exchanges indicated that PSUs will now also be subjected to ASM and GSM scrutiny. According to the updated guidelines, PSU stocks will face close monitoring, and any excessive price fluctuations could trigger tighter trading restrictions under the ASM framework. By the time a stock reaches ASM Stage 4, its price movements could be severely curtailed.

This regulatory shift, though intended to enhance market integrity, raises concerns. How will PSU stocks attract institutional investment under such stringent curbs? The new rules could further weaken market sentiment around these companies, leaving investors questioning whether the risk is worth the reward. Is the government content with driving large investors away from PSU stocks?