Policy and Regulatory Perspective of Corporate Governance

Mr. Madhusudan Sahoo, Secretary of the Indian Institute of Company Secretaries of India (ICSI) addressed the students on “Policy and Regulatory Perspective of Corporate Governance”. Mr Sahoo's rich work experience of over three decades in the private and public sector, in various functional areas such as policy reform, research and analysis made the talk more enriching as he was personally involved in the process of change that he was discussing with the students. Mr. Sahoo's discussion focused on the shifting of the traditional functions of the government to various smaller bodies setup by the government – what Mr. Sahoo calls neo-governments. For example, the Securities and Exchange Board of India (SEBI) has become one of the main regulators of the financial market. The objective of the SEBI Act, 1992 is to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Other smaller regulatory bodies are empowered with delegated authority, which aims to regulate the same market. This creates conflict on how a particular issue should be dealt with.

Today there are multiple neo governments aiming to regulate the financial market. This resultant regulatory overlap creates conflict and confusion, which at times requires the Central Government to interject. As an instance of such confusion, Mr. Sahoo discussed the regulation of Unit Linked Insurance Plans (ULIPs), which resulted in the overlap of regulatory mechanisms prescribed by SEBI and the Insurance Regulatory and Development Authority (IRDA). While SEBI issued a notice to the stop the product, IRDA permitted the use of the same product. In this situation, the Parliament had to step in and clarify that a product with any element of insurance will fall within the ambit of IRDA.

While SEBI is the most dominant player, there exist many other players such as brokers, NASDAQ, RBI, Ministry of Finance, etc. in the same domain. Given that there are various regulators, Mr. Sahoo highlighted that this has led to regulatory overlaps, gaps in regulatory mechanisms, creation of twilight zones and a lacuna as to who will fulfill the objectives of the SEBI Act, 1992.