SEBI’s Relaxation for Investment Bankers Sparks Integrity Concerns in Indian Markets

The Securities and Exchange Board of India (SEBI) eased guidelines for investment bankers to carry out unregulated activities without packaging them in autonomous entities—a move which has raised controversy on potential dangers to market integrity.

 

Key Highlights:

 

•⁠  ⁠SEBI board order reverses a previous directive that had requested investment bankers to demarcate non-regulated activities, such as private placements on behalf of unlisted firms and advisory on projects, into distinct units with independent branding.

 

•⁠  ⁠Industry participants warn that this de-regulation would lead to conflict of interest and systemic risk, as the activities are not specifically regulated by SEBI.

 

•⁠  ⁠The regulator's previous consultation paper had identified key risks, including that non-regulated activity had the potential to create loopholes and dilute the effect of supervision.

 

•⁠  ⁠The action follows a sustained lobbying effort by the investment banking sector, with SEBI stating it needed to rationalize business and keep pace with changing market practice.

 

•⁠  ⁠Legal specialists warn that the lack of segregation can undermine transparency and create fertile ground for regulatory arbitrage.

 

Prospects: Although the transition provides operational flexibility to investment bankers, it is a source of concern regarding loopholes in regulation and market abuse possibility. Market professionals call for SEBI to watch these developments closely and explore further measures to uphold market integrity in the context of a dynamically evolving financial environment.

 

Source: Hindu BusinessLine, HDFC Sky