Markets regulator Sebi has on an average one employee for every six listed companies, while its counterpart in the US SEC has almost one staff for each listed firm, according to a report by a high-level panel on corporate governance.
In key divisions such as corporate finance, which is responsible for ascertaining the quality of financial statements of listed firms, Securities and Exchange Commission (SEC) has 15 more employees than Sebi.
The SEC has a total of 4,554 employees as compared to 780 with Sebi. "Therefore, staff strength at Sebi needs to be increased to strengthen its monitoring and enforcement functions," the panel headed by eminent banker Uday Kotak recommended. It suggested Sebi to outsource certain functions with relevant safeguards.
According to the panel, successful enforcement actions by Sebi can have the twin effect of penalizing the guilty, on the one hand and creating a significant deterrent effect on the other hand. However, for such deterrent effects to be felt in India, Sebi must equip itself so that it can adroitly gather evidence with the objective of "investigate to litigate." It suggested Sebi to develop teams comprising data scientists, accountants, lawyers specialized in corporate law, software engineers and academicians.
The members need to have the depth of knowledge within their respective areas as also possess broad expertise across functional areas. In addition, Sebi should build its market intelligence through regular review of market research and reports of proxy advisors. "Sebi, therefore, needs to follow regulators across the world in utilizing specialist hires. It may even consider creating a revolving door policy between employees at Sebi and in the private sector, allowing Sebi to hire laterals," the panel suggested. The panel on corporate governance submitted its report to the Securities and Exchange Board of India (Sebi) on Thursday.