SEBI advisory board bats for greater corporate governance

The International Advisory Board of the Securities and Exchange Board of India (SEBI) advocated greater corporate governance in Indian firms to protect the interests of all stakeholders, the watchdog said on Saturday.

"The advisory board deliberated over the recent developments on corporate governance in India at its seventh meeting held on Friday and Saturday here," the market regulator said in a statement.

The board observed that a matrix of expertise would make the board diverse and balanced for the effective functioning of a company.

"There has to be transparency in board appointments and removal process and audit committee should focus on forward looking risk assessment in addition to retrospective evaluation," pointed out the board members.

Asserting that board evaluation was an important element in corporate governance, the members felt the process had to go beyond a box-ticking exercise and should be conducive to the growth of its company.

"The best evaluation is an exercise in self evaluation of the company`s performance and effectiveness in terms of its mission, financial returns, strategy, business model and social responsibility," said the statement.

The meeting also took note of the extant framework for investment advisory business, including the role of mutual fund distributors and regulatory arbitrage between the investment advisor and mutual fund distributor providing advice.

On migration to fee based advisory model from commission, the board said the transition has to be gradual and in tandem across regulatory segments for uniformity.

"Regulators need to keep in view the financial viability and the business model of the advisory business. Proper due diligence before transition in regulatory regime is essential," added the statement.

The meeting also deliberated on the internationalization of securities market, framework for product innovation, risk management and crowd funding.

Besides SEBI Chairman U.K. Sinha, Singapore Exchange Director Jane Diplock, Said Business School Professor Colin Mayer, Nikko Asset Management Company Chairman Blair Pickerell and Hong Kong Securities and Futures Commission`s former Chairman Andrew Sheng are members of the advisory board.

The watchdog`s Executive Directors S. Raman and G. Mahalingam also participated in the deliberations.