Sucheta Dalal :SEBI: Capricious obstructions
Sucheta Dalal

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SEBI: Capricious obstructions  

March 30, 2011

SAT orders have exposed SEBI’s caprice

Sucheta Dalal

Several orders of the Securities Appellate Tribunal (SAT) have begun to expose the capriciousness of the Securities and Exchange Board of India’s (SEBI) dealings with intermediaries and investors. A glaring example was a recent appeal by accounting major PricewaterhouseCoopers (PwC) which enjoys little public sympathy after repeated gross professional failures culminating with the massive Satyam fraud.

Yet, even in this case, those who attended the hearing say that SAT was forced to ask SEBI to give PwC a fair trial and also said that it was unfair of SEBI to seek reasons for the cross-examination which is a matter of right. SEBI was asked to give the accounting firm access to all the documents procured and relied upon. It could well be that PwC is finding ways to delay the trial. After all, its attempt to settle the issue by paying a fine and filing consent proceedings was turned down by the regulator.

SEBI has also turned down PwC’s request to delay proceedings until the Central Bureau of Investigation (CBI) completed its hearings. This makes it even more imperative for SEBI officials not to provide opportunities for further delay and add to the cost of litigation through trivial obstruction.

There are nearly a dozen instances where SAT has pulled up the regulator for capricious actions. One realty company even filed an appeal because SEBI would not permit inspection of documents by its advocates. Similarly, in another recent case, SEBI was told that it could not use the wide provisions of Section 11B to issue directions to impose punitive orders against intermediaries and investors, unless it was important to ensure the orderly functioning of markets. In that case, a SEBI member had issued a compensation order under these provisions.

SEBI’s propensity to issue orders under Sec 11B and refusal to complete hearings within a reasonable time frame is notorious. Unfortunately, individual litigants were helpless in the face of such behaviour since the finance ministry has exercised no oversight over the regulator in the past five to six years.


-- Sucheta Dalal