Upendra Kumar Sinha holds the unenviable record of being the only regulator against whose appointment four public interest litigations, or PILs, have been filed. Hundreds of RTI applications were moved and his eligibility challenged—not only for the Securities and Exchange Board of India (Sebi) chairman’s post, which he currently holds, but even for his previous appointment, as head of UTI Asset Management Co. Ltd.
Who’s behind this? I ask him. “It’s a mystery to me. I guess those who don’t want me at Sebi are behind this,” says Sinha with nonchalance. We are at Jiggs Kalra’s Masala Library at Bandra Kurla Complex in Mumbai on a Monday afternoon.
Sinha opts for a fresh lime soda while I choose the burnt curry leaf martini. In addition to handling the PILs he has been in the news for fighting Subrata Roy of Sahara India Pariwar. “I have been branded as an activist who wants to curb Sahara. I am just doing my job,” says Sinha.
(Sahara India Pariwar filed a Rs.200-crore defamation suit against this author in December even before his book Sahara: The Untold Story was published. An out of court settlement was reached in April and the book was published in June.)
Illustration by JayaChandran/Mint
By nature, Sinha, 62, loves a challenge and his fight against the so-called collective investment scheme (CIS) is testimony to this. Nowhere in the world does a market regulator oversee the complex, murky arena of CIS; it’s the job of the state. A CIS is a scheme formed by any company under which the contributions or payments made by investors are pooled and utilized to make profits. There has been rampant misuse of this vehicle, using regulatory loopholes, and Sebi initiated 50 cases, many of which it is battling in the courts. “When people lose money, I must intervene,” Sinha says.
The chicken tikka starter comes in a jar; the amuse-bouche is molecular khandvi with a miniature bun maska. For mains, we order tandoori roti, dal and meen moilee (river sole served with a coconut-based sauce). Ahead of that, a mishti doi lollipop with a dash of strawberry sauce arrives to cleanse the palate.
On Sahara, says Sinha, Sebi was meticulous. For instance, when Sahara sent records of millions of investors in its contentious money-raising scheme in some 31,000 cartons in 127 trucks in September 2012, Sebi was prepared with the space to store these records.
Readers will remember the battle that was waged publicly too, through full-page advertisements in national newspapers. I ask Sinha about Sahara’s allegation that Sebi has never seriously checked whether the investors exist or not. In 2008, when the Reserve Bank of India (RBI) closed down Sahara’s para-banking operation, there was no case of missing depositors. Sinha’s explanation is that unlike in the previous instance, this time the Supreme Court told Sahara to deposit the money with Sebi. “We were not allowed to advertise in newspapers and on TV channels, asking depositors to reach out to us. We did that only on our website. Now, with the court clearance we will do so,” he says. Roy has been in New Delhi’s Tihar jail since March for alleged non-payment of money to the bond holders.
Sinha has got even more on his plate after the recent amendment to the Sebi Act which empowers it to clamp down on CIS worth at least Rs.100 crore. Will we see Sebi cracking down on all Ponzi schemes? Sinha says there needs to be more coordination among Sebi, the RBI, the Union ministry of corporate affairs and various state governments, as such schemes need to be stalled early. The new law also gives Sebi special power for recovery and faster resolution of cases through special courts. “We have got more powers and along with that more responsibility and accountability,” Sinha says.
“In parenthesis: A love for music and Urdu poetry helps Sinha fight stress. During his morning walk, he listens to music on his iPod. After reaching home from office in the evening, he listens to music for at least an hour. Another way of unwinding is playing Bridge. Sinha can recite Sahir Ludhianvi’s famous poem ‘Taj Mahal’ and Mirza Ghalib’s poems flawlessly.”
He has already embarked on an exercise to restructure Sebi to prepare it for the new regime. Consulting firm Oliver Wyman has studied several weaknesses of Sebi; it wants the regulator to be more proactive. Sebi typically gets into enforcement action after an event has happened but does not do much to prevent things from happening. Penalty for offences is also pretty low in India. This needs to be raised, particularly for insider trading and market manipulation. Sinha wants the market regulator to be accountable for what it does and remove discretion from the decision-making process. He has already made some critical changes. For instance, serious offences like insider trading or front-running are no longer part of any consent process. Sebi has also formulated a new takeover code and norms to govern market infrastructure institutions.
Sinha is a seasoned bureaucrat. Early in his career he was district magistrate of three districts in Bihar. As a district magistrate in Patna, he worked under four chief ministers. Later, in the finance ministry, he worked under four finance ministers.
The son of a freedom fighter who was jailed for three years for participating in the Quit India Movement, Sinha started his career as a probationary officer in the State Bank of India (SBI) after completing a postgraduate course in physics from Patna Science College (he has a bachelor’s degree in law from Patna University). At SBI, at the age of 23, Sinha learnt his first lesson of finance looking after a Rs.60 crore portfolio of commercial and institutional finances. IndusInd Bank Ltd’s managing director and chief executive officer Romesh Sobti was his batchmate at the bank. In 1976, Sinha quit the bank and joined the Indian Administrative Services (IAS), despite the better salary at SBI. However, during his joint secretary days in the Union home ministry, he got a somnolent portfolio—joint secretary (freedom fighter and rehabilitation)—to oversee refugees from Pakistan and rehabilitate them. There was virtually no work but even there Sinha excelled and within six months was given a key assignment of handling the election in Jammu and Kashmir in 1996.“I believe that whatever assignment is given to me I must do it sincerely. If I do this, the system will recognize me,” he says.
He sees his entire career as an exercise in connecting the dots. The circle that started with his assignment in early IAS days as managing director of Bihar State Credit and Investment Corp. Ltd was completed when he took over as Sebi chief in 2011. As joint secretary in the banking division of the ministry of finance, he played a key role in the merger of ICICI Ltd with ICICI Bank Ltd to create India’s first universal bank; and as joint secretary in charge of capital markets, he supervised the restructuring of Unit Trust of India (UTI), the country’s first mutual fund. “The UTI recast has been the finest financial engineering in the Indian financial market—the financial involvement of the government was limited, the fiscal outgo was staggered over a period of time and the government ended up making money,” he reminisces.
I ask for his views on corporate India. “There is too much abuse of related-party businesses,” he says. “Compensation of key management people should be scrutinized thoroughly—this has been a global practice.” He also emphasizes independent remuneration and audit committees of the board. “We need to focus on these if we want foreign investors to have confidence in the Indian market.”
It is well past 3pm now and I see him looking at his watch. Without wasting time, I shoot the last question: Why is Sebi taking so much time to decide on the Reliance Industries Ltd’s (RIL) alleged insider trading case? Sinha pauses for a moment, gathers his thoughts, and tells me with a straight face, “You would need to find out who is to be blamed.” In 2013, Sebi rejected RIL’s consent proposal. Since then, the case has come up for hearing 16 times at the Securities Appellate Tribunal. Who is to be blamed? I look at him confused but he refuses to say more. Sometime one needs to focus more on what a regulator doesn’t say than what he reveals.
