Mumbai: The vigilance cell of the Securities and Exchange Board of India (Sebi) issued a guidance note to speed up cases involving enforcement or adjudication, a day before outgoing chairman U.K. Sinha demitted office.
The note said that cases where interim orders have been passed need to be confirmed within three months; it added that final orders after investigations need to be passed within a year of the interim orders. Mint has a copy of the note.
This will be a welcome gift for new chairman Ajay Tyagi as he takes charge at a time when the regulator is sitting on at least 6,000 cases that are pending adjudication.
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Some of them such as the alleged violation of fraudulent and unfair trade practices by Reliance Industries Ltd date back a decade but was moved for adjudication only in 2016. In other cases as the Satyam Computer Services fraud, the Supreme Court pulled up the markets regulator for ‘dragging its feet’ in concluding the case against the accounting firm Pricewaterhouse Coopers and directed it to dispose of the matter in six months.
“Self-discipline within Sebi to deal with adjudicating proceedings is important and…the timeline needs to be shortened,” said Sandeep Parekh, a former executive director at Sebi and founder of Finsec Law Advisors.
“There has been an over-liberal use of ad interim ex parte orders where a person is punished based on a prima facie view and then Sebi conducts its investigation without any time-bound plan on the timeline. Such a punishment before the trial has begun has the problem of an automatic bias towards finding guilt in the person,” he added.
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Under section 11(B) of the Sebi Act, the regulator has the power to pass interim orders against market entities if their conduct is harmful to the integrity of the market.
This guidance assumes importance in the wake of interim orders passed in the case of Long Term Capital Gains (LTCG) evasion scam, where Sebi has barred over 1,500 entities in the past two and half years. Only some of these orders have been confirmed and final orders are awaited.
The guidance note also called for more accountability of adjudicating officers.
An email sent to Sebi on Wednesday was unanswered.
To be sure, this is a guidance note.
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“Guidance notes are not legally tenable but such a note will act as guiding force for Sebi whole-time member and adjudicating officers. A speedy justice should always be the endeavor of any regulatory authority,” said J.N. Gupta, a former ED at Sebi and co-founder of Stockholder Empowerment Services.
The note from the Sebi vigilance department comes after an October 2016 circular from the Central Vigilance Commission (CVC) that advised government bodies to speedily resolve quasi-judicial proceedings. It is unclear why Sebi’s vigilance department took six months to implement the CVC circular.
“In case any matter is pending beyond one year, status report in this regard may be put up to the board with chronology of events with reasonable justification in each case,” the note said.
The note has also advised Sebi officers to give priority to cases that have been referred by Central Bureau of Investigation (CBI), Securities Appellate Tribunal (SAT), Courts and also cases that have been highlighted by the media.
