Thank you Mr. Bhave

by Manshu on February 3, 2011

in Opinion

Dear Sir,

There’s not much time left before you step down as the SEBI Chairman, and I want to thank you for all that you have done for me.

If it weren’t for you – I would still be paying those blasted entry loads on my mutual funds, which did nothing for me but fatten the wallets of those who were pushing them to me, and insisting me to churn those mutual funds for my own good.

If you hadn’t stepped in – I would still be paying 2% or more for absolutely no benefit at all on my mutual fund purchases.

Your insistence that agents be paid for their advice and investors know what they are paying for will probably be the beginning of a new service model in the industry, and I hope people remember and thank you for it 20 years from now.

And I can’t begin to thank you for allowing me to keep my money in my own bank account when I apply for an IPO. I don’t quite understand how ASBA works, but I absolutely love the fact that my money is only debited from my account when I am allotted shares.

As if that wasn’t enough – you brought big institutional investors at par with me by asking them to deposit the full application money up front. I never could understand why they pay only 10% while I have to pay the whole amount.

These days I check if a promoter has pledged their shares before investing in a company, and it acts as a good filter to warn me against companies that could go into trouble later. For bringing in this transparency – I thank you sir.

I was delighted when you imposed a ban on 14 insurance companies from issuing new ULIP plans without your permission, and god alone knows how many thousands you saved me by taking that step. Though I would have loved to see you regulate them closely I still benefited from the fallout of your action immensely, and for that – my sincere gratitude to you.

When you fined the mighty ADAG group Rs. 50 crores, I really did wish that your term is extended, as it was proof (if anyone needed it) that your SEBI is a regulator with tooth, and you’re not going to shy away from imposing the rule of law on the powerful, but alas that didn’t happen.

I also wish that more of my kin knew how much you have done for us because you have truly taken care of us in your tenure.

Thank you for all that you have done for me, and I wish you great health and happiness!

– An ordinary investor

{ 28 comments… read them below or add one }

Hemant Beniwal February 3, 2011 at 3:59 am

Hi Manshu,

Even I will really miss Mr Bhave – I finalized my entry into advisory on announced of no entry load.

Even I started my blog that time – my first post was “Mis-selling Month”

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Manshu February 3, 2011 at 4:45 am

I was rather hoping that his term gets extended, but didn’t – one more point against the current govt. in my mind.

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FL February 3, 2011 at 10:02 am

Hats off to Mr. Bhave for his sincere efforts. I wish India more people like Mr. Bhave, Mr. E. Shreedharan (of DMRC), etc.

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Manshu February 3, 2011 at 10:29 am

yup, sure gives hope that things will be better.

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Nishanth February 3, 2011 at 1:28 pm

Thank you , Mr.Bhave , for fighting for the small investors.

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Manshu February 3, 2011 at 11:22 pm

Now let’s just hope that his actions are not undone!

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Amit Khandelia February 3, 2011 at 7:38 pm

He really deserves a grand farewell ..Great work we must say in the political environment which we operate..

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Manshu February 3, 2011 at 11:23 pm

I think it’ll be a muted farewell based on the very little coverage in the media so far, but that may just be because there are still some days to go.

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Loney February 3, 2011 at 8:10 pm

I thank you for writing a post on my icon Sri.C.B.Bhave. If at all there is a period in the capital markets regulation that is dedicated to the empowerment of the small investor and making the capital markets safe for them, it is this period of three years ending February 2011. If at all there is a capital market regulator any where in the world who single-mindedly worked towards the elimination of the weeds that were eating away the money of the small investor, it is the SEBI under the guidance of Sri. C. B. Bhave.
C.B.Bhave is to SEBI what T.N.Seshan is to the Election Commission of India.
Any regulator should not hesitate to take on big powerhouses if they were guilty. SEBI, under Bhave, never hesitated to take on the most mighty of them all. The list of powerhouses they took on is huge. To name a few
1. Reliance ADAG – Consent order
2. Reliance Industries – Insider Trading (under progress)
3. Sahara India Pariwar (issue of OFCD)
4. MCX-SX
5. 14 Life Insurers
6. IRDA
7. HDFC mutual fund (Front Running)
and the list goes on…
He was a man with a vision. He was once asked on the financial inclusion aspect in capital markets and he was candid in his reply. He said, India is not ready for financial inclusion in the capital markets and a person who earns Rs.70,000/- per year should definitely stay away from the capital markets as he doesnot have the appetite to stomach even a small loss in capital. Remember that Insurers are selling ULIPs to the same people when SEBI doesn’t want them to enter stock markets. India is grossly under-insured and an average Indian’s life is insured for about Rs.70,000/- and still IRDA hasn’t asked insurers to sell term plans.
It seems that Bhave was not given a second term due to lobbying by several of the powerhouses he had taken head-on.
Already there is a buzz among the mutual fund industry about sounding a death-knell to the no-load environment once Bhave has stepped down.
Now that U K Sinha would be the next SEBI chairman, i would like to see him take the capital markets forward (and not backward by reinstating the entry load regime).

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Manshu February 3, 2011 at 10:32 pm

Loney you’ll be glad to know that I’ve received several emails from people who have replied to this daily email, and said how much they appreciate Mr. Bhave’s work, and will be sad to see him go.

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Loney February 4, 2011 at 6:04 am
Loney February 4, 2011 at 6:21 am

I am glad that people appreciate the work of people like Bhave. While a non-financial person (I belong to the field of science) like me understands the importance of the work of Bhave, persons in the field of finance would appreciate the services rendered by him more than I do. Now that the term of Bhave is coming to an end, i would like you to move forward and open a discussion on what needs to be done by the new SEBI chief to take the system forward. I would like to start with a few observations:
1. Consolidation of mutual fund schemes – I believe there are too many and they are redundant too.
2. Warren Buffet calls derivatives as financial weapons of mass destruction. Shiv Raj puri understood exactly what Warren Buffet meant when the CitiBank fruad came to light. Financial products should be simple. Financial innovation should be curtailed
Others may add…

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Manshu February 4, 2011 at 11:15 am

I’d like to see a bit more done on insider trading. Especially with respect to promoters taking leveraged positions in derivatives before important announcements like mergers, buybacks etc.

Secondly, I’d like to see longer dated derivatives also. The way they are currently, it is difficult to use them for hedging. If Nifty futures started selling for 12 months expiry instead of 3 then they will be useful for hedging.

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Abhishek February 3, 2011 at 10:29 pm

I didnt knew he was stepping down. He is indeed respectable man, did lots of thinks with liberal view.

Hats of to Mr. Bhave.

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Manshu February 3, 2011 at 10:31 pm

There was this discussion that his term will be extended but as Loney said there were probably a lot of vested interests to not let him continue, and lobby hard against him.

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Smart Singh February 3, 2011 at 11:06 pm

Like all good things, it comes to an end. It’ll be really sad if his actions were to be reversed in future.

Thank you for a splendid post Manshu. And thanks Loney for the addition.

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Manshu February 3, 2011 at 11:25 pm

Thanks SS – I read somewhere that they were trying to get back this entry load and stuff, but I thought dude you can’t actually reverse that now.

After reading Loney’s comment though I wonder if they really can. I mean it could happen, I don’t know why I dismissed the thought at first.

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Loney February 4, 2011 at 6:28 am

Thank you Smart Singh.

I love your cartoons. I have become a regular follower of your blog too.
I laughed the hell out of me after seeing your cartoon on the Indian Investor : A hard nut to crack.

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Vamsi February 4, 2011 at 5:02 am

Thanks Mr Bhave. Thanks for saving us (the small investors).

What T.N.Seshan did to Election Commission, Bhave did the same to SEBI. He proved that SEBI is not just a market watchdog monitoring the numbers but one with a sharp tooth to bite the market biggies.

Wish his term gets extended, if not I wish to get another visionary like Bhave.

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Manshu February 4, 2011 at 11:16 am

That’s a good comparison which even Loney brought out.

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Loney February 7, 2011 at 7:10 am

CB Bhave sets the bar high for SEBI’s new Chairman UK Sinha

Stock brokers celebrated in 1994 when the second chairman of Sebi GV Ramakrishna retired. It may be the turn of people in mutual funds and investment banks.

CB Bhave , the seventh chairman at the market regulator, will for the last time preside over the board meeting today. Of course, no major decision may be taken. It may well be tea, coffee, snacks and good wishes for an undisclosed future.

Millions of investors would thank, and miss Bhave, as they did when his mentor Ramakrishna, under whom he took up market regulation. A few scores of people in funds and investment banks would be relieved as there may not be any more regulatory scolding, at least in public.

In three years as chairman of Sebi, Bhave did many things that made investing better – the abolition of entry loads on mutual fund investments, indirectly bringing down the cost of buying Ulips, though at the cost of a public spat with a fellow regulator.

The trust in regulator also grew when he proved wrong the theory that the high and the mighty are beyond the law. The launching of an investigation into the Anil Ambani group of companies and a settlement later. The engagement with the Sahara group and the one with the Financial Technologies group regarding shareholdings are some to name.

These achievements were possible for Bhave and Ramakrishna due to one common quality in them – honesty.

“Mr Bhave is one of the most upright persons I know,” says R H Patil, chairman of National Securities Depositary where the outgoing Sebi chairman served as MD before returning to the market regulator for the second term. “He is straight to the facts and never plays games.”

Bhave’s blunt talk even made many event organisers wonder whether they should invite him or not to preside over functions. What was done for publicity, turned out to be self-inflicted wounds.

“If you really want to reach out to the so-called small investors in whose name you do everything, does he need 3,000 options?” Bhave questioned at a mutual fund summit. “Is there really so much of innovation that is going on? Are these schemes really so different from each other or were there incentives operating in the market that made us generate these 3,000 options?”

That was not a one-off event. “Steep pricing could enrich bankers and companies, but demoralise investors,” Bhave said at a conference organised by the Association of Merchant Bankers of India. “You need to introspect whether it is a healthy practice. If you keep investors disappointed day in and day out, the cause of investors will only be a lip service.” This attitude of Bhave has earned him many friends even among the financial services industry.

“He doesn’t beat around the bush,” says HDFC chairman Deepak Parekh. “He goes strictly by the rules and is not afraid of going after MFs or corporates, irrespective of the stature of the promoters or entities. He has done a remarkable job.”

But controversies like the public spat with Irda, on who has the right to regulate Ulips, showed the other side of Bhave – adamant, unyielding and one who would go to any extent to prove his point.

Enforcement of regulations also got better under Bhave with many rulings on insider trading, price rigging and manipulation. But some dispute that the statistics may not be revealing the truth.

Some 50 cases are pending before the tribunal, compared to hundreds earlier. Bhave’s will be an unfinished agenda. The implementation of the Jalan Committee recommendations on market intermediaries and the Achuthan panel’s takeover rules. Both are welcomed by investors, but opposed by industry. UK Sinha , Sebi’s designated chairman, will be judged by where he stands on these issues.

—— Courtesy : The Economic Times

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Debashis Basu February 21, 2011 at 7:27 pm

You guys are very serious and well-meaning set of people and I dont want to take away anything from your points. But Sebi is a large organisation with a lot of responsibilities. Here are some other snapsots of Sebi’s performance

http://www.moneylife.in/article/rot-inside-sebi-strange-warning-letters-to-let-off-serious-offenders/14020.html

http://www.moneylife.in/article/rot-inside-sebi-regulator-collects-call-data-of-2327-subscribers-without-authorisation/13811.html

http://www.moneylife.in/article/mirror-mirror-on-the-wall/9244.html

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Manshu February 22, 2011 at 7:34 pm

Debashis – I’ve expressed gratitude based on the steps SEBI took during his tenure, and because I directly benefited from these steps.

If there’s someone out there who feels that abolishing MF loads, or a face – off with IRDA has been detrimental to investors then they have every right to voice their opinion, but that’s not the inference I draw myself, or a view that I subscribe to.

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Loney February 22, 2011 at 8:03 pm

These articles speak exhaustively on rejection of MCX-SX application. You will have to read the detailed order and you’ll find how water-tight the case is against MCX. Stock Exchanges are the self-regulatory bodies and there are MIMPS norms for the share-holding pattern in Stock Exchanges. Entities can hold a maximum of 5% stake in exchanges and MCX holds a 5% stake and in addition holds warrants that are convertible at a later date and has sold warrants with a CALL option. Don’t you think this is a case of going around regulations.

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Debashis Basu February 23, 2011 at 5:37 am

I have not raised the issue of entry loads being good or bad.
The first two articles have nothing to do with MCX.
With all due respect I have only said, Sebi is a vast organisation and has many sides
So, how about another aspect of Sebi which have nothing to do with entry loads and MCX
http://www.moneylife.in/article/8/6567.html
http://www.moneylife.in/article/sebi-in-the-dock/11969.html

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Loney February 23, 2011 at 7:28 am

1. Your first link speaks on Warning letters sent to offenders. Have you read the complete orders from SEBI? Because, SEBI writes very detailed orders mentioning the various instances of offence and the discussions with the persons involved and it also gives reasons for the punishments imposed. Hence comments on orders without reading complete orders would be wrong.
2. Your second link speaks about collecting call data. SEBI is a quasi-judicial body and i don’t see anything wrong in collecting call data. It’s not tapping anyone’s phone.
3. The third link speaks of MCX_SX, for which i have answered
4. Your fourth link speaks about consent orders. SEBI has a very good system with respect to consent orders. There is a high-level term which even has a retired Judge that decides whether a consent request should be accepted. Only if that committee clears the settlement, the case is taken and after due examination, the order is passed and again these orders are detailed and are posted in the SEBI website for public to see.
5. You last link was dated December 2007 when Bhave hasn’t even taken the top post at SEBI. So it is irrelevant here.
Hope this answers all these questions.

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Manshu February 23, 2011 at 2:14 pm

This post is particularly about Bhave though hence I was looking for stuff about Bhave in your links. Anyway thanks for sending the links.

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Debashis Basu May 9, 2011 at 10:09 am

Its all coming apart now! Truth has an inconvenient way of coming out
As I said, Sebi’s regulator’s job is more than removing entry load
http://www.moneylife.in/article/dr-mohan-gopals-explosive-exposé-of-sebis-functioning-under-bhave/16246.html
http://www.moneylife.in/article/non-est-orders-on-nsdl-become-est-again/16219.html

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