Sebi should restrict itself to being a market regulator. Any attempt to overstep the boundaries of capital market regulation and transgress into areas under the normal purview of other agencies may not augur well with its reputation.

The deadline for companies to fully comply with Clause 49 of the Listing Agreement is over. While Sebi or the Stock Exchanges are yet to give a list of non-complying companies, business dailies reported that about 80 companies have informed the stock exchanges regarding compliance of the revised Clause 49 guidelines during the last few days of December 2005. The Sebi Chairman categorically denied all reports and rumors of extension of the deadline after the Sebi meeting held on December 30, 2005.

While the investment community and the public in general have been highly appreciative of the role played by Sebi as regulator in bringing order to capital markets and implementing governance norms, some questions arise when it comes to Sebi's role in establishing certain aspects of corporate governance practices in companies. It is true that most of the countries have the market regulator prescribing various norms of corporate governance in the listing agreements between companies and the stock exchanges where the company's shares are listed. But the question is about Sebi's role in deciding the structure of the board, like stipulating the percentage of independent directors or deciding on the maximum percentage an independent director can hold in the company.

Sebi, as the name suggests, has more to do (or only to do?) with securities and their transactions (exchanges). Sebi is essentially expected to be a market regulator and not a company regulator. Company regulation starts with the formulation of the company while Sebi's role in regulation will start taking effect only when the company chooses to raise funds from the public. While a large percentage of governance practices are necessitated when the company chooses to raise funds from the public, certain governance practices are essential even for unlisted companies. There are many big companies in India which are not listed on the stock exchange. Since such companies have also to deal with all other stakeholders (other than public shareholders), Sebi's role in governance matters start only after the company decides to become public. Hence, it seems to be out of context on the part of Sebi to intervene in regulating the structure or composition of the board and dictate the percentage of independent directors and the like.

Effective Executive Magazine, Securities and Exchange Board of India, Independent Directors, Capital Market Regulation, Corporate Governance, Governance Practices, Tata Group Companies, Tata Motors and Tata Chemicals, Department of Company Affairs, DCA, Regulatory Mechanisms, Sebi Act, Ambuja Cement India Limited.