Meleveetil Damodaran demitted office as chairman of the Securities and Exchange Board of India on Monday after an eventful three-year term. C B Bhave is now the new Sebi chairman.
The former Sebi chief, perhaps, had the most eventful period in the last three years of his career, though he also took some significant initiations in his previous two jobs -- UTI Asset Management Company and IDBI Bank.
Both at IDBI Bank and UTI AMC, he won accolades for successfully bringing out the organisations from the brink of collapse.
At Sebi, he made exceptional progress in introducing a range of products. His initiatives in launching the qualified institutional placement, more or less, reduced the importance of the global depository receipts -- which used to be a popular fund-raising option for India Inc.
The fast-track issuance route, designed for big corporate houses, was modelled on the lines of the United States' Well-Known Seasoned Issuers (WKSIs) concept.
Damodaran did not yield to pressure, when he put curbs on the controversial participatory notes (P-notes). The move was aimed at knowing the sources of funds pouring into the Indian capital market.
He also welcomed hedge funds to participate directly in the market and register with the regulator. The stance taken by Sebi eventually proved to be a right step, considering the volatility that followed in the Indian market due to the US sub-prime mess.
Most P-note investors used the US credit market turmoil and the relatively strengthening Japanese yen to sell in markets, including India.
For the record
- The move to launch qualified institutional placement (QIP), more or less, reduced the importance of GDRs
- Curbs on P-notes, despite all the hue and cry, benefited Indian markets
- The disgorgement order in the IPO scam remains the most controversial of Damodaran's decisions
- A mechanism for introducing short-selling has been put in place
- Launched a range of products in the F&O segment, including mini-contracts
Sebi also allowed the introduction of a range of products in the derivatives market, including mini-contracts and allowing retail investors to dabble in the futures and options market.
The capital market regulator also started putting in place rules for short-selling, which will allow investors to bet on a fall in prices, if they have run up fast.
The high point (some would say the most controversial) of his term at Sebi is his successful investigation into the IPO share allotment scam. Sebi found that manipulators were opening fictitious demat accounts to corner initial public offer allotments.
But the problem with the order was that Damodaran was perceived to be going after the wrong persons. In the process, the order went against National Securities Depositories, which was then headed by an upright officer, C B Bhave.
Sebi also came out with the disgorgement order -- unheard of and unprecedented -- in the IPO scam, which asked the parties (who failed to identify the smart route adopted by manipulators in opening thousands of demat accounts) to pay up the ill-gotten gains to investors.
It was a complicated, if not impossible, attempt to recover the money the manipulators may have gained at the cost of investors through gains on the listing day.
Sebi also tried to put curbs on NSDL's attempt to enter other segments of government work such as a record-keeping agency for the Pension Fund Regulatory and Development Authority.
Damodaran's term was also the period of an unprecedented bull phase for the stock markets. The benchmark Sensex rose by an average of over 40 per cent in the last three years, prompting Sebi to tighten the systems in the market.
Much was expected from Damodaran on the investigations into the May 17, 2005, crash, which occurred at the time of his predecessor, when the UPA government took office. But no major findings came out, except the fact that some small fries were booked.
The regulator stood his ground on the Clause 49 rule, which said that at least 50 per cent of the board should comprise of independent directors.
Even public sector companies were not spared, despite the pressure from the ministries concerned.
Damodaran also did not budge on the need to make the Permanent Account Number (PAN) compulsory for all mutual fund investors.
(Above) Outgoing Sebi chief M Damodaran (right) shakes hand with his successor C B Bhave in Mumbai on February 18. Photograph: Pal Pillai/AFP/Getty Images
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