Sucheta Dalal :Regulator: SEBI is just as bad
Sucheta Dalal

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Regulator: SEBI is just as bad  

August 8, 2011

The Securities and Exchange Board of India drags a report against Religare Securities through adjudication over a paltry penalty of Rs3 lakh, but seems unable to investigate case of rampant price manipulation

Sucheta Dalal

If the Emmel Financial case makes SEBI appear investor friendly, then a 16th June SAT order quickly dispels the notion. Religare Securities, a stock broker and depository participant (DP), which claims half-a-million clients, was inspected by SEBI in 2007. Its report found over 60 “deficiencies/irregularities” in the broking as well as DP operations and called for an explanation. After Religare’s submission, the adjudication officer issued a show-cause notice in 2009 but whittled the charges of deficiency/irregularity down to six in the brokerage business and 12 in the DP operations and finally imposed a penalty of Rs3 lakh. Most brokers would have paid up, but Religare decided to contest the charge. The SAT order says, “The inspection carried out by the inspecting team was faulty, which compels us to give the benefit of doubt to the appellant.”

Apparently, SEBI accused Religare of failing to produce documents at the time of inspection. But, as SAT emphasises, neither documents nor explanation was asked during the inspection. In another case, SEBI’s grounds for levying a penalty seem like petty nitpicking over whether a stamp paper was dated. As SAT has correctly ruled, the purpose of an inspection is not punitive and ‘every minor discrepancy’ is not culpable. SEBI feels impelled to drag a simple inspection report through adjudication and appeal, on a paltry Rs3 lakh penalty, but seems unable to investigate cases of rampant price manipulation which Moneylife has been writing about for years. This is a sorry reflection on the state of regulation and supervision.


-- Sucheta Dalal