The Hindu Business Line : Jaswant tables Action Taken Report on JPC findings

INDICATING towards a sea-change in regulators framework for the country's capital market, the Action Taken Report (ATR) on the report of the Joint Parliament Committee (JPC) on stock scam has said that the impending measures include an integrated system of surveillance across cash and derivates segments of the markets, a closer vigil on insider trading and a intense watch on stock deals close to announcements of corporate takeovers and mergers. The practice of short sales is also being reviewed.

The report has also hinted at possible future consolidation in the banking sector by way of mergers with the Reserve Bank of India having constituted a group to prepare a pilot policy statement on takeover and mergers of banks. "The RBI has constituted an inter-departmental group to prepare a pilot policy statement on takeover/merger, transfer of shares of banks as a priority area. It is examining formulation of a framework for voluntary and other mergers of banks in the light of past experience. The framework would also cover the observations of the JPC and requisite legal amendments would also be proposed," the ATR has said.

The ATR, that details the steps taken by the Government's and other regulatory bodies on the suggestion of the JPC, was laid in Parliament on Friday by the Finance Minister, Mr Jaswant Singh. He said that while a lot has already been done by the Government in deference to the JPC's wishes, lot remains to be acted upon. "Action is still in hand. We shall ensure that wherever such action is pending it is completed early," he added.

Ruling out any systemic weakness as a cause leading to the scam that had the stock broker Ketan Parekh as the key figure, the ATR has said that the scam was more a result of violation of the laws and regulation framed by the various regulators.

"SEBI has asked exchanges to take up more investigations relating to merger/takeover announcements and place more emphasis on identifying insider-trading cases by examining trading activities around the time of major announcements by corporates," the Government has said in the ATR.

On integrated surveillance of the cash and derivative segments, the ATR said that help is being sought from the USAID and IBM to bring about the new systems since "no readymade system is available or in use in other regulatory bodies".

It has aid that the five-member group consisting of two SEBI and representatives and three RBI officials have been constituted for exchanging information on alerts related to the areas regulated by the respective bodies. "It (the group) would work on identifying unusual activity in the system which might have a bearing on market integrity," the report said.

However, the report said that the market regulators of different segment would remain at arms length in view of their statutory autonomy. Instead, the concerns of the JPC regarding regular reviews of the financial and capital markets would now be addressed by constitution of separate technical committee headed by senior functionaries in RBI, SEBI and IRDA. Each committee will have representation from other regulatory agencies.

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