SAT (Securities Appellate Tribunals), in a recent order has pulled up SEBI (Securities and Exchange Board of India) for their unjust punishments that they inflicted on some media players; SEBI had pronounced different punishment in similar offences done by different market players.
Background of the SAT’s order
The order of SAT came in the wake of an appeal field by Almondz Global Securities Ltd. In which the merchant banker claimed that in the case of similar offences by other business organizations Securities and Exchange Board of India had taken much more lenient penal action against them.
It all started in December 2011 with the SEBI issuing an interim order through which it restricted Almondz Global Securities from obtaining new assignments till further directions. The final order of Securities and Exchange Board of India on this issue came in March 2014 through which SEBI banned the merchant banker for 5 months.
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According to SEBI, the merchant banker was awarded such punishment because its investigation had found due diligence lacking on part of the banker which was handling the public issue of Bhartiya Global Infomedia. However, in its order the Tribunal (SAT) expressed its view that it felt that the violation done by Almondz Global was not grave enough to invite such a “severe punishment”.
This order of SAT gives strength to the accusation leveled at SEBI about lack of uniformity, on part of SEBI, in penalysing market players. And the most alarming aspect of the entire issue is that it is not the first time that the SAT has highlighted the lack of uniformity in actions taken by adjudicating officers of SEBI.
The Giving more authenticity to the accusation on SEBI, a security lawyer and a former SEBI official said “If one analyses orders passed by SEBI against merchant bankers, an interesting aspect comes to the fore. There is no uniform standard of due diligence expected of merchant bankers in a public issue process.” Clarifying further the former official said “The situation is a case study, a brief snapshot of which can be seen in this SAT order (in the Almondz Global matter). The Association Merchant Bankers of India along with SEBI could probably develop an objective checklist as to the peripheries of diligence, which today is subjective. ”
After hearing arguments put by both the parties, SAT finally quashed the remaining punishment of the merchant banker by putting forward reasons of its order.
SAT: An abridged introduction
Set up under the provisions of Section 15k of the Securities and Exchange Board of India Act, 1992 Securities Appellate Tribunal (SAT) is a statutory body. It was established to hear and dispose of appeals against orders passed by the SEBI (Securities and Exchange Board of India) or by an adjudicating officer under the Act and to exercise jurisdiction, powers and authority conferred on Tribunal by or under this Act or any other law for the time being in force.
SAT has only one branch (bench) that sits at Mumbai. The jurisdiction of the Tribunal is all over India.
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SEBI: A Short Introduction
SEBI (Securities and Exchange Board of India) is most probably the most important regulatory body. It is very much similar, in its function and nature, to the Securities Exchange Commission in the US set up in 1988 to regulate the functions of securities market, SEBI that encourages orderly and healthy development in the stock market, was granted legal status in May 1992 as in the beginning the Board was not capable in exercising control over the stock market for on its part it acted as a watch dog to observe the activities but was toothless in regulating and controlling them.
SEBI, having a main purpose of keeping a check on malpractices and protect the interest of investors, was established with a purpose to meet the requirements of three groups. These three groups are:
- Issuers: The Board caters for issuers a market place in which they can get finance fairly and easily.
- Investors: The Board caters for investors protection and supply of accurate information.
- Intermediaries: The Board caters for intermediaries a competitive professional market.
SEBI had been established with the objective to protect the interest of investors in the securities markets and to encourage the development of and to regulate the securities markets with an intention to create a dynamic and efficient securities market.
SEBI acts on the complaints registered by investors against listed companies or intermediaries. The Board acts as a nodal agency on the complaints that are not solved directly between the contending parties, or when the investor is not comfortable with the response of the organization.
Complaints entertained by SEBI
SEBI has listed the nature of complaints investors can file:
- In case the consumer does not receive refund order or allotment advice in case of investment in IPOs, FPOs and rights issues;
- In case the consumer does not receive dividend from listed companies;
- In case the consumer does not receive share certificates after transfer from listed companies.
- In case the consumer does not receive debentures after transfer or interest or principal on redemption and interest on delayed payment; and
- In case the consumer does not receive rights after letter.
One can approach SEBI with the appeals related to other areas such as corporate governance, corporate restructuring, acquisitions, buybacks, delisting and any other compliance linked issues. To do this the complaint/aggrieved party has to:
- File the complaint electronically on the SEBI website;
- Obtain a complaint registration number;
- Pursue the status of the complaint online.
After the completion of the above mentioned steps, SEBI after determining the merit of the complaint takes up the matter with the concerned company or intermediary.
The Board, exercising its powers can also instruct intermediaries to rectify the investor complaints appropriately if the case attracts such an order. One can send one’s grievances by post or fax also.
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