Shareholder activism is good for minority investors (head of Sebi)


MUMBAI : Commenting on the recent wave of shareholder activism in the Indian stock markets, which has seen many shareholders vote against the resolutions proposed by the companies as well as the actions taken by shareholders to replace the current board members, the Sebi chief Ajay Tyagi said on Thursday that such shareholder activism is good for everyone, especially minority investors.

Tyagi also defended the regulator’s proposal to reduce the settlement cycle for stock transactions to T + 1 days compared to existing T + 2 days, which drew criticism from foreign institutional investors as well as domestic brokers.

“I would say it’s (shareholder activism) good for everyone, especially minority shareholders. If shareholders become cautious about whether they own shares in a company, what their role is when they vote on a resolution, no one can argue that it shouldn’t be there, ”Tyagi said, speaking at the CII Financial Markets Summit.

“There could be an argument as to whether they are being properly counseled or not, but that depends on them. If we say investors have the right to invest in the F&O market, they can invest in risky trades, they are adults, so they certainly have their own minds. This is something that no one should find fault with or have any problem with. So this is something that is very good, I would say that the shareholders really apply their mind and do not follow the herd mentality and decide what to do in each of the resolutions, “he added.

Regarding Sebi’s proposal to move towards a T + 1 settlement cycle, Tyagi said that early settlement is beneficial for investors and that we should try to move closer to it.

“This is something that we should wish to move forward. And if your systems need improvement, you have to improve those systems. No one can claim that a quick settlement is always good. And today there is a technology, so to say that it is not at all feasible, or it is not possible, is not correct. There is nothing wrong with taking initiative in something and you can’t just say it hasn’t happened elsewhere, ”he said, adding that investors need to do some soul searching.

In addition to foreign investors, the Association of National Exchanges Members of India (Anmi), a group of over 900 stockbrokers across the country, has also raised concerns on issues related to the implementation of the T + 1 settlement system.

Speaking on activity in the IPO market, the Sebi chief said the regulator is considering reforming IPO price brackets, as the narrow price brackets seen in many IPOs run counter to the The goal of price discovery through the book creation process.

“If price discovery is to be through book creation, there should be a group.

If the group costs only one rupee, then where is the pound. We are looking at this, ”Tyagi said.

He also added that although retail market participation has increased in both primary and secondary markets, the regulator does not plan to increase the quota of retail investors in IPOs.

“The discovery of market prices for IPOs is not as transparent as that of the secondary market. Although there are many disclosures, it is difficult for retail investors to study them because the documents are large and technical and then it just becomes a herd mentality to hunt for IPOs. While we encourage retailer participation in IPOs, instead of increasing the retail quota, we would prefer to see their participation in secondary markets where there is more information about the company and more liquidity. ”Tyagi said.

Tyagi also added that the regulator is working on various initiatives to deepen corporate bond markets.

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