Mumbai as an International Finance Centre
While skimming through the report and particularly the recommendations of the HPEC, there were some recommendations which caught my eye. Chapter 8 deals with financial regime governance issues and concludes that '...the weakest links in an Indian effort to compete with other IFCs are issues of financial regulation (E6 to E11) and the overall weakness of its legal system. These are the areas on which this report places great emphasis as needing immediate strengthening if a viable IFC is to emerge in Mumbai.' Chapter 15 contains the recommendations of the HPEC and it minces no words, while describing the functioning of the legal system 'leaving much to be desired.' It goes on to recommend that 'urgent action be taken to remedy these short-comings with suitable reform of the legal system. If that cannot be done relatively quickly then, in the interim, consideration should be given
by policy-makers to establishing a special system of fast-track ‘financial’ courts and special arbitration mechanisms to deal with the legal and regulatory
complexities that an IFC and the provision of IFS will create.'
While many of the legal reforms will be in the area of civil dispute adjudication, there is a need to consider how to improve the effectiveness of investigation of financial crimes. Thanks to the trends of adoption of new technologies and new business models, issues of data security have become extremely important. There is a report in today's DNA about increased fraud levels among Indian companies.
The large scale stock market scams perpetrated by Harshad Mehta and Ketan Parekh are still to reach the logical end of prosecution, conviction and sentencing. Having handled these cases at some stage, I can vouch for the severe dearth of adequate numbers of skilled investigators who are capable of understanding financial crimes and bringing the offenders to book. This is where the area of police reforms becomes relevant. A good starting point would be separation of law and order and investigative functions. There needs to be higher investment in these areas to build capacity and offer incentives for specialisation.