Buch is the only chairperson in Sebi’s 36-year history who has a background in the private sector.
The people currently under consideration for the post include department of economic affairs secretary Ajay Seth, Sebi whole-time member Ashwani Bhatia and deputy comptroller and auditor general Anand Mohan Bajaj, said one of the persons quoted above.
The second person said the secretary to the government in another economic ministry, and the chair of a financial sector regulatory body are also under consideration. The names of these officials could not be ascertained.
Seth and Bajaj have long experience in government, especially in the finance ministry, while Bhatia had a long career in public sector banking before joining Sebi.
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“A former or serving bureaucrat has a good chance,” said the first person quoted above.
From the private sector, some securities lawyers and market experts have applied. The final decision will be taken by the appointments committee of the Union cabinet, on the recommendations of the Financial Sector Regulatory Appointments Search Committee (FSRASC) led by cabinet secretary.
FSRASC can recommend any person of merit, even someone who has not applied for the post, a government order said last month, while inviting applications by 17 February.
To be sure, government appointments can also spring surprises.
The preference for a civil servant indicates that the political executive is keen on someone with a background of the bureaucratic steel frame for the market regulator’s job. The officials under consideration bring extensive experience in financial market regulation, taxation and policy making.
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The advantage of seasoned bureaucrats with experience in the finance ministry and in the public sector is that they are familiar with economic planning and policy making, have a deep understanding of the regulatory ecosystem, can navigate government structures and are well-versed in collaborating with other regulatory bodies.
In December, the government appointed the then revenue secretary Sanjay Malhotra as Reserve Bank of India (RBI) governor to succeed Shaktikanta Das, also a former finance ministry veteran, who left after a six-year term at the central bank.
Queries emailed on Tuesday to the finance ministry, Prime Minister’s Office, Sebi and the officials mentioned seeking comments remained unanswered. The term of the current Sebi chairperson comes to end on 28 February.
Whether a person with government experience or private sector background is more suited for Sebi cannot be answered in a simple way, explained former finance secretary Subhash Chandra Garg.
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“The capital market regulator not only needs to be independent and knowledgeable about governance, but also needs to know about the capital market. Markets have become too technical and quite complex. The choice could either be a person with government experience who is also well-versed in market-related matters, or a person with private sector background who also has a deep understanding of governance and policy matters. Institutional experience should not be the only criteria,” said Garg.
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Recent controversies
The current Sebi chairperson was recently surrounded by a controversy when US-based short-seller Hindenburg Research raised allegations about her ownership in some offshore funds. Buch replied that the investment in the fund referred to in the Hindenburg report was made in 2015 when she and her husband were both private citizens and was almost two years before she joined Sebi as a wholetime member.
Buch and her husband Dhaval Buch stated on 11 August that Sebi has strong institutional mechanisms of disclosure and recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred, Mint reported on 11 August.
These developments also exposed both Buch and the government to criticism from opposition Congress party.
Also read | Sebi chair Madhabi Buch owns majority in Mumbai consultancy named in Hindenburg report
Experts, however, pitch for keeping doors open to private sector talent in regulatory bodies.
Pradeep S. Mehta, public policy expert and secretary general of think tank Consumer Unity & Trust Society (CUTS) said more private sector expertise should come to regulatory bodies.
“Parliament makes laws. In the same spirit, regulatory appointments should also be confirmed by the relevant Parliamentary standing committee, so that there is a public discourse on these appointments. Their selection panels too should have two-third non-government members,” said Mehta.
