Satyam founder B Ramalinga Raju's communication about an accounting fraud left market regulator Sebi in a fix over halting trade in the stock, but it allowed the scrip to change hands although the US markets did not.
"At that time the issue was do you close the market or do you allow the market to operate?
"Now if there is somebody who knows about the confession (and) wants to buy (or sell) at price 'X', should we as a regulator be coming in the way?" C B Bhave, chairman of Securities and Exchange Board of India, told PTI.
His first reaction on receipt of Raju's e-mail was, however, that of disbelief.
"The content of the e-mail were such that no CEO had ever sent an e-mail like that... one had to verify whether it is genuine or (is) somebody playing a prank," Bhave said, sharing his experience on handling the country's largest corporate fraud estimated to be about Rs 10,000 crore (Rs 100 billion).
"If it was true it was dangerous not to let the market move."
The scrip of the iconic IT firm crashed 78 per cent to Rs 39.95 from Rs 179.10 on January 7, the day of the disclosure.
Responding to queries as to why investors interest was not protected whereas the government saved the company and its employees, Bhave said: "Our judgement at that time was that we should not be coming in the way of such a transaction.
"As long as this information is available to the whole market, which was all over the media, we didn't see the need to intervene in the price formation process".
Asked about the difference in response by the regulators in US and India after the disclousre of the accounting irregularities, Bhave said the US halted trading in the scrip for one day and the next day when they found that Indian markets were going on, they allowed resumption of trade.
"May be they learnt from us. I don't know," he suggested. In any case, Satyam's primart listing is not in the US. It is only their ADR which is listed there.
Why India, a fast growing market, should play a subservient role or follow the developed countries, Bhave wondered in the context of actions taken by US regulator after the financial crisis.
"It appears that the (global financial) crisis was handled much better in India," he said.
Sebi had initiated action to plug loopholes, if any, after the Satyam fiasco, which had also raised questions about the role of IT company's auditor.
The regulator had ordered peer review of accounts of blue-chip companies by a second audit firm.
"Peer review is still on. Once we will get all the peer reviews then we would study those. Action is on," Bhave said.
Sebi had approached the Institute of Chartered Accountants of India to make it mandatory for audit firms of all listed companies to have such a review.
The peer review, suggested by the Sebi Committee on Disclosures and Accounting Standards, was aimed at reassuring global investors and at the same time strengthening financial reporting.