The Bombay Stock Exchange, the premier exchange in the country was at one time well known for its murky practices. Trading methods were not transparent, deals were not time-bound, brokers’ contract notes did not clearly mention the price, commission and carry forward charges. Exchanges were closed down whenever it suited the interest of brokers. There was significant amount of insider trading. The “badla” carry forward system made the market more prone to speculative instability. Evidently, the system needed reforms.
The Capital Issue Act, 1947, was repealed and the office of Controller of Capital Issues was abolished. Companies are now free to approach capital markets after clearance by SEBI. The system was made more transparent and speedy at the Bombay Stock Exchange, and screen-based trading was adopted. Also, the National Stock Exchange was established.
Enough authority and power was given to SEBI to regulate capital markets. Powers of recognition, rules, articles, voting rights, delivery contracts, stock exchange listing and nomination of public representatives were delegated to SEBI.
In terms of the listing agreement, listed companies are required to disclose corporate information to the stock exchanges where they are listed and also on the EDIFAR, an electronic filing platform currently maintained by SEBI. This results in multiple disclosures/filings for the companies that are listed on more than one exchange. SEBI, in consultation with NSE and BSE, is in the process of bringing a common electronic platform maintained/run by Stock Exchanges. A listed company would be required to file only on this platform for the purpose of satisfying the requirements of listing agreement.
It has been argued that reforms have been introduced in haste, without proper planning. We have faced the consequences of this in the form of various scams and scandals such as the security scandal, sugar scandal, hawala case, fodder scam, etc. in the 1990s. But simultaneously, it wrote a whole new story of development, globalisation and employment generation for India.