MUMBAI, July 5: The capital market needs to put in place a senior regulatory body which can overlook decisions made by the regulatory bodies directly monitoring market intermediaries, according to Dr S A Dave, former chairman of the UTI.

Addressing newspersons at a press conference held here to mark the release of the report on `Infrastructure for Capital Market', Dave said a senior regulatory body could help ensure that the markets do not suffer due to the lack of coordination and information-sharing between regulators.

The committee formed by the Association of Merchant Bankers of India (AMBI) which came out with the report under the chairmanship of Dr Dave suggests the need to establish joint crisis-handling procedures between Sebi, RBI and other government agencies involved in the financial markets.

The report also suggests the creation of a special tribunal, called the capital markets tribunal, to help the swift adjudication of disputes between the capital market participants. Another way of improving dispute resolution is by conscious encouragement of arbitration, preferably through self-regulatory organisations such as Ambi and Amfi.

In another recommendation, the Dave committee has suggested the creation of a single investor protection corporation instead of multiple ones to help speed up the process of compensation and restore the confidence of investors. The report says that India could follow the system followed in the US where the Securities Investor Protection Corporation (SIPC) was formed under an Act of the Congress.

Another suggestion made was the need to eliminate the `Closed User Group' (CUG) policy adopted by the department of telecommuncations (DoT) which has proved to be a major impediment to the interlinking of two networks. The report states, "Service providers should have no powers over the content that is caried over their wires. Whether a line carries voice or data or fax or is used for some kind of computer networking, the service provider should charge a price for bandwidth and then have no locus standi in dictating how bandwidth can or cannot be used."

The panel also emphasised the need to upgrade the legal, institutional, knowledge and technological infrastructure in the capital markets to face the global challenges in the 21st century.

As regards the primary market, the report says that Sebi should modify Book Building guidelines. The committee has also recommended market-making as a method for improving liquidity and hence reducing cost of capital for small mid-cap companies. According to Dave "Venture Capital should be actively used as a method for funding high-risk small projects, small mid-cap companies." The report further said that information should be easily available which will ensure quality and quantity of research. This would be possible if public institutions follow continous disclosure norms. Bigger corporates should be required to release a summary statement of the balance sheet on a quarterly basis. On derivatives, he said there should be a separate regulatory agency to monitor these instruments and also take a composite view of the trading in derivatives.

Securitisation is another point which has been tackled by the committee which recommended that the government should create a committee to study the problems that inhibit asset securitisation and should also look into some precise regulations to enable securitisation in India to take place.