SEBI Chairman U.K. Sinha has cautioned of an investor exodus from markets if their concerns on risk are not addressed.
“Investors are increasingly seeking trust, confidence and rule of law in markets. We have been conscious of this,” he said at the annual securitisation conference held by National Institute of Securities Market in Mumbai on Wednesday.
The European securitisation market is now 30 per cent of what it was and the same market in the US is one-sixth. In India's IPO market, corporates are not coming in and when they come in, the response is lukewarm, he observed. SEBI would not tolerate if grievances are not redressed, said Sinha. To improve perception, it was important to have sound origination, good distribution networks. He said moral hazards and incentive structures should be questioned.
‘Follow the rules’
On credit rating agencies being subject to litigation by companies, he said that companies should follow the rules of the game rather than be upset about a rating, if they are raising money from the public.
“Good sense will prevail upon companies and the courts will let the due process prevail and let SEBI do its job. Issues are there when there is a default on a bank loan even for a day. Delay in informing the rating agency results in a delay in informing the change in rating (of an instrument) to the investor that the agency has rated.”
SEBI will engage with every entity in the chain to improve the system, said Sinha.
On the NSE flash crash of October 5, Sinha said “We are looking at the incident in all its dimensions and trying to look at measures to improve the system and prevent further recurrence.”
He also observed that the Union Government had to provide clarity on the real and final position on taxation of special purpose vehicles in securitisation transactions for the concept to pick up.