Regulators should anticipate problems - SEBI

NEW DELHI (Reuters) - Asian economies need to improve regulatory processes and implement better risk management systems to anticipate problems and deal with volatile capital flows, India's stock market regulator said on Friday.
Regulators needed to identify potential risks and address them rather than merely react to events, Securities and Exchange Board of India (SEBI) Chairman M. Damodaran said at a conference of securities analysts.
"We need to put in place systems anticipating problems rather than respond to them inadequately and in delayed fashion after a problem has overtaken us," he said, adding foreign investors chasing higher returns could quickly abandon Asian markets if returns fell.
"That will impact on volatility in our markets. That will impact on our ability to cope with inflows that are large and sometimes outflows that are even larger," he said.
Last month, SEBI tightened investment rules for unregistered foreigners. Damodaran said then that SEBI wanted inflows to be transparent, while the finance minister said it was to moderate inflows.
"Regulators can no longer afford in our markets to play black pieces in the game of chess ... We need to occasionally make first moves as people with white pieces do," he said.
Damodaran said regulators also needed to protect investors by making sure investment analysts disclosed commissions and other payments as well as possible conflicts of interests to investors.
"Today investors in many of our markets are blissfully unaware of what conflicts of interest can hurt them," he said.
Last month, SEBI sought public comment on a draft proposal on regulating investment advisers that covered issues such as registration and disclosures of all commissions and rewards received for recommended investments.