The International Advisory Board (IAB) of SEBI has said it was more important to change the culture of companies instead of regulating through traditional ways of setting the rules and levying fines. The panel observed that the fines imposed by the regulator have limited impact.

SEBI had constituted the IAB in September, 2011, to seek guidance from international experts on future direction for the organisation, taking into account relevant global experiences, emerging challenges and latest developments in the regulatory space. At a meeting on Wednesday, the IAB said regulations should be guided by the kind of market structure SEBI would like to have besides the need for transparency and competition.

The IAB further recommended that there was a greater need for securities market regulators to work closely with central banks in dealing with systemic level macro prudential risks. It also said the approach to regulating both market activities and conduct of individuals should be granular (broken down into small pieces or detailed) with both firms and individuals being held responsible for misconduct.

With limited resources, regulator should follow the money and look for toxic behavioural elements at all levels right from product design to execution of transactions, the IAB said.

Conduct regulation should be made factoring in issues such as increasing impact of technology (algo trading), monitoring of transaction level data to ensure integrity of benchmark determination besides increasing cooperation between regulators for market manipulation which transcends jurisdictions, the IAB proposed.

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