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Rediff News  All News  » Business » Sebi's overgovernance!

Sebi's overgovernance!

April 10, 2004 14:15 IST

The Securities and Exchange Board of India has come out with a grandiose scheme vide Notification F. No. SEBI/LE/26/2003 [Advt. III/IV/69-ZB/2003/Exty.] dated November 20, 2003 for creating and maintaining a 'Central Database' (CD) of all specified market participants for themselves and their related persons.

This CD is an electronic representation and storage of information that may be created and maintained by a Designated Service Provider in respect of the persons who have been allotted Unique Identification Numbers under these regulations. Person, in this regard, means a natural person, a registered company, a body corporate, a partnership concern, a trust, a registered society, or any other legal entity.

The market participants are:

  • Intermediaries and their associates.
  • Other entities such as recognised stock exchange, clearing corporations, approved intermediaries under the Security Lending Scheme, 1997, investor associations and includes any other person granted recognition by SEBI.
  • Companies whose securities are listed in a recognised stock exchange and include a public company which intends to get its securities listed and their associates.
  • Investors in securities and includes foreign institutional investors, their sub-accounts and foreign venture capital investors. These are not treated as intermediaries.
  • Designated service provider for handling the database.

The related persons are:

  • Principal officers and personnel engaged in the operational activities.
  • Promoters who are directly or indirectly in control of the company, other than those of the central or state government or any statutory authority. In this case, a relative means, a) spouse b) parents and children, dependent or otherwise and c) brothers and sisters. There are other stipulations in relation to holding a certain percentage of equity shares that we shall not deal with for want of space.
  • Directors, in case it is a body corporate. Director does not include a nominee director.
  • Partners, in case it is a partnership firm.
  • Associates and their directors.
  • Sponsors, trustees, asset management companies and asset managers, where applicable.
  • Proprietor, where applicable.
  • Relatives of the natural persons mentioned in clauses (i) to (vii) above. Yes, you read it right. The spouse, dependent children and dependant parents are defined as relatives and will also be included in the Database.

'Associate' in relation to an intermediary or a listed company means a person:

  • Who, directly or indirectly, by himself or in combination with his relatives exercises control over the intermediary or listed company or has a holding of not less than 15 per cent in the paid up equity capital of the intermediary or the listed company.
  • In respect of whom the intermediary or listed company directly or indirectly or indirectly exercises control.
  • Whose director or partner is also a director or partner of the intermediary or listed company.

The data that will be captured on the CD against each and every UIN are:

  • Name of the person (with proof)
  • Father's/husband's name
  • Mother's Name
  • PAN (could have been used as UIN for saving the cost)
  • TIN (if applicable)
  • Address (with proof)
  • Telephone (office/resident)
  • Qualifications (with proof)
  • Training information (with proof)
  • Fingerprints of the forefinger and the thumbs of both hands taken by the service provider on the computer
  • Photo taken by the service provider on the computer.

Incidentally, I was looking out for the names of relatives in the CD but did not find it. I wonder how the data of the relatives will be linked with that of the person.

It has since been clarified that dependent minor children need not obtain UIN or make applications in respect of the same. I wonder why the spouse has been left out. For, asking for fingerprints and other personal information of the spouse, who is also independent entity like the children is an invasion of privacy of the individual.

On a rough estimate, the number of those who need an UIN is around 40 lakh (4 million). The cost per UIN is fixed at Rs 300. Consequently, the cost to the country is estimated at Rs 120 crore (Rs 1.20 billion)! Profit is a function of cost of funds. Is the cost of this fast track project commensurate with the benefit it is supposed to bestow?

What is any earth-shaking necessity to callously allocate dollops of public money that will be devoured by this project? Can Sebi get its paws on any scamster more effectively with this CD?

I sincerely doubt the effectiveness when in the case of the likes of C R Bhansali, Harshad Mehta and Ketan Parekh, thousands of investors suffered in spite of all data being available. In any case, no regulatory actions have been taken even after more than a decade.

It is common knowledge that investigation in this great nation of ours is an exercise in obfuscation of evidence to ensure that the guilty goes unpunished after it has been nobody's case.

This Sebi diktat seems to have been induced not by economic rationality but irrational panic. Sebi exists to help but not harass. This regulation virtually borders on utopia and is as difficult to enforce as was the election card which was doomed from its inception.

Similarly, this regulation not only being an expensive exercise in futility, is also arbitrary, unreasonable and violative of natural justice and if implemented would cost the economy dear.

I hope Sebi is listening.

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A N Shanbhag