Reforms will change stock market operations

Stock brokers on India's 20 exchanges have initiated a dialogue with the Securities and Exchange Board of India (SEBI) following a spontaneous strike regarding quantum of registration fees to be charged by SEBI. While the broker community resists regulation, it is fairly certain that deregulation and liberalization in the economy will bring a drastic change in the way Indian brokers do their business. Currently, exchanges are riddled with problems like unbridled speculation and insider trading. SEBI requires substantial funds to monitor these activities, conduct research, and provide investor protection. Ultimately, the core of these reforms will be the stock exchanges themselves, as securities regulation must be tightened to maintain investor confidence.

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Development finance institutions have played a constructive role in establishing India's industrial base. However, these institutions seem to have moved away from their developmental role and are getting entangled deeper in management and control of private sector industries. Corporate circles have been pleading for a re-examination of the role and appointment of nominee directors to avoid day-to-day interference in company operations. Furthermore, some argue that financial institutions should keep their funds rolling by disposing of shares with a ready market. The concept of growth or mutual funds has yet to take root in the country, but such funds could prove successful in mobilising and canalising community savings for industrial development.

The Securities and Exchange Board of India (SEBI) has framed rules to register and regulate stock dealers, share shoppes, and unauthorised stock exchanges under Section 12 of the SEBI Act. These rules are proposed with a view to redressing the grievances of investors in semi-urban and rural areas who have been experiencing difficulties in getting services for disposal of securities or consolidating odd lots. The regulations impose a statutory duty on stock dealers to deal only on a spot delivery basis and issue receipts in a specified form. Additionally, every applicant eligible for grant of a certificate must pay an initial fee of Rs 50,000 to keep the certificate in force. Stock dealers will have to submit information relating to their activities as and when required by SEBI.