The government is mulling a comprehensive code of conduct for financial analysts and investment bankers to make them more accountable to the companies and retail investors they serve. A proposal in this regard from a high-powered committee of Institute of Chartered Accountants of India (ICAI) that investigated the financial scandal at the erstwhile Satyam Computer Services is under the consideration of the ministry of corporate affairs.
A government official told that the idea was to create a code of best practices that financial analysts and investment banks need to adhere to while providing strategic advisory services for mergers and acquisitions, divestment or services like trading of derivatives, commodity and foreign exchange.
Investment banks, many of which operate under the umbrella of foreign multinational groups, function under the supervision of the capital markets regulator SEBI, but do not have any specific code of conduct to follow.
“The proposal is a follow-up on the process of re-building and repairing the investor’s confidence in the Indian securities market affected by the Satyam scam. Credibility is the pillar to an effective securities markets,” said Jagannadham Thunuguntla, Equity Head, SMC Capitals.
He pointed out that investment banking in India is different from that of merchant banking, which is more specific to management of public issues for companies. The services of an investment bank is more diverse ranging from investment research to corporate finance and private equity.
“Many retailers have the tendency to depend on research reports of small broking houses and boutiques,” said Mr Thunuguntla, adding that a code of conduct will add to the credibility of such reports.
source : economic times