Much ado about nothing - Mr. Sathe's appointment to SEBI

The recent appointment of noted jurist Mr. Arun Sathe as a part-time member of SEBI should raise eyebrows, but only due to the partisan reporting that has surrounded its notification.  This episode is yet another indication that in an era of non-stop reportage and TRP pressures the notions of reasoned debate and a respect for process are being given short shrift. The charge against Mr. Sathe is essentially that as a “political man” (whatever this means) of a right-wing persuasion, he is somehow ineligible to hold any responsible office, including the role of a part-time member of SEBI. This kind of assertion is astounding in modern India that aspires to be a superpower in a culture of meritocracy and equality.

Are Mr. Sathe’s critics confident that every official in high office who is in the executive branch of government is completely apolitical? Is it correct to expect that people in public life will not hold an ideological preference in their personal lives? Should the focus not instead be on the individual’s actions prior to an appointment or even after he/she assumes the post under question?

The sad consequence of the brouhaha in this episode is that the facts are being conveniently buried. First, Mr. Sathe is a noted jurist in tax matters. The constitution of the current SEBI board (see here) is without any legal representation and hence it can be argued that he is suited to making valid contributions to SEBI’s board, especially in an era of increasing global regulation of the financial sector. Second, he has been transparent in stating his personal involvement with the RSS and the BJP, neither of which are organizations whose members are debarred from public office.  Third, the government is well within its rights to nominate part-time members to the board. In fact, this prerogative extends even in the appointment of the Chairman of the Board. Fourth, the code of conduct of the SEBI board has explicit provisions that require members to declare conflict of interest. Further, the Board also entertains unsolicited submissions from the public on conflict of interest matters, provided they are backed by material facts. If indeed Mr. Sathe is not “fit and proper” to be on SEBI’s Board, pray where is the smoking gun?

Such protest from within certain quarters is in stark contrast to the situation in countries like the USA. Here, people in high office are often noted members of the industry that is being regulated by the entity. Instances like that of Mr. Robert Rubin (Treasury Secretary and co-head of Goldman Sachs), Mr. Hank Paulson (same as Mr. Rubin), Mr. Robert Khuzami (General Counsel, Deutsche Bank and SEC) are but a few instances of a well-established system. This allows the regulator to implement policy decisions that incorporate the market realities. Closer home, the appointment of Dr. Raghuram Rajan as RBI governor helped to assure global markets and also steer the Indian economy adroitly. This government’s continuing support has helped the RBI to proceed on the path of financial inclusion with confidence.

This government has refrained from over-commenting on this case, beyond stating that due consideration has been exercised in proposing Mr. Sathe to the Board. This is in stark contrast to the unsavoury situation that SEBI found itself a few years back when Mr. C B Bhave, former Chairman and Mr. K M Abraham were “honoured” with a preliminary enquiry (PE) from the CBI for their role in providing a license to MCX-SX. Mr. Abraham had even alleged that there was undue pressure on SEBI from the Finance Ministry (headed then by Mr. Pranab Mukherjee) on this and other cases. In the face of a public backlash, and importantly with no evidence of any wrong-doing, CBI had closed the PE.