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Regulation of Firms in Securities Market

Regulation of Firms in Securities Market. November 1-2, 2002. Firms . Focus areas Issuers Intermediaries Infrastructure providers. Approach to Regulation. Self Regulated Supervised Broad Framework Micro Regulation – Weaknesses

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Regulation of Firms in Securities Market

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  1. Regulation of Firms in Securities Market November 1-2, 2002

  2. Firms • Focus areas • Issuers • Intermediaries • Infrastructure providers Visit us at www.nseindia.com

  3. Approach to Regulation • Self Regulated • Supervised • Broad Framework • Micro Regulation – Weaknesses • Should work for issuers, intermediaries and infrastructure providers Visit us at www.nseindia.com

  4. Issuers – Regulatory goals • Good corporate governance • True and fair picture of corporate performance • Fair deal to all classes of investors Visit us at www.nseindia.com

  5. Issuers- Regulatory framework • Effective Board Structure • Improved Board Supervision • Improved Accounting Standards and Financial Disclosure • Improved Continuing Disclosures Visit us at www.nseindia.com

  6. Some Issues • Independence of directors? • Disclosures • Public offerings: fairly adequate • Private placements: weak • Continuous disclosures: in letter, not in spirit • Incentive for self regulation? Visit us at www.nseindia.com

  7. Exchange intervention • Listing Agreement ineffective • Limited powers to impact errant companies • Suspension/delisting not the answer Visit us at www.nseindia.com

  8. Exchange intervention (cont.) • Need to filter entry • Need to mix objective and subjective criteria • Problems with using subjective criteria • Alternate to exchange capital? • Continuing compliance issues remain Visit us at www.nseindia.com

  9. Intermediaries – Regulatory goals • Integrity of market dealings • Fair dealings with customers • No interference with price discovery Visit us at www.nseindia.com

  10. Intermediaries – regulatory framework • Focus on compliance • Focus on supervision • Board governance ? • Disclosures • Nature and role? Visit us at www.nseindia.com

  11. Dealings with customers • Front running • Misuse of customer assets • Key role of internal control systems Visit us at www.nseindia.com

  12. Distorting price discovery • Intermediary collusion • Pyramid of Investment companies • Trail of Fund Flows Visit us at www.nseindia.com

  13. Intermediaries -issues • Culture of compliance – low but changing • Cost of compliance • Business structure discourages investment in compliance • Gains from compliance not obvious • Cost of non-compliance low Visit us at www.nseindia.com

  14. Exchange intervention • Market structure issues • Effective supervision and enforcement • Disclosure of track record • Rating of intermediaries? Visit us at www.nseindia.com

  15. Infrastructure providers • Congruence of business & regulatory interest • Good governance seen to attract market share • Transparency in operations effective • Self regulation within a broad supervisory framework? Visit us at www.nseindia.com

  16. Going Forward • Encourage continuous disclosure • Track record • Data base on errant participants in public domain • reputational damage as disincentive • Regulations should be reviewed for criticality Visit us at www.nseindia.com

  17. THANK YOU Visit us at www.nseindia.com

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