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Two capital market experts depose before JPC

The two capital market experts deposing before the Joint Parliamentary Committee probing the multi-billion stock scam on Wednesday favoured banning stock brokers from being on the board of stock exchanges to prevent irregularities and check vested interests from developing.

JPC chairman Prakash Mani Tripathi told reporters that former Sebi and Divestment Commission chairman G V Ramakrishna informed the committee that stock exchanges have become "of the brokers, for the brokers and by the brokers".

Ramakrishna was not surprised that the scam took place as there had been pointers that it might occur, Tripathi said, adding the former Sebi chairman felt that the market regulator had enough power to keep vigil on the stock markets.

Ramakrishna was also of the view that there was need for proper co-ordination among the four government agencies, which are required to carry out surveillance -- Sebi, RBI, Income-Tax and Company Affairs departments.

Both Ramakrishna and National Stock Exchange director R H Patil felt brokers had "undue" influence in stock exchanges, Tripathi said, adding they felt that as long as stock exchanges were controlled by brokers, small investors' interests will be neglected.

Asked if the experts felt that Sebi had failed to perform, Tripathi said this question could be answered after cross-examining the market regulator.

All they said was that the market regulator had enough power of surveillance. A traffic police required only a whistle to regulate traffic and certainly not an AK 47 gun, Tripathi quoted Ramakrishna as saying.

Laxity in surveillance and overlooking of malpractices could be some of the reasons for the scam, Patil had told JPC, adding banning of badla sytem would not lead to a fall in overall capital formation as feared in certain quarters.

Noting that the view of the two independent experts were more or less similar, Tripathi said they felt that the money transacted in buying and selling in shares should not pass through brokers.

A mechanism should be evolved wherein all payments for buying and selling in stock exchanges be made through banks. Presently transactions by institutional investors and corporates are through banks and this should be extended to other payments as well, the experts had suggested.

Regarding the need to reduce the number of stock exchanges in the country in the face of communication revolution, Patil felt that market forces will take care of this and pointed out that six stock exchanges are already virtually non-functional.

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