Sucheta Dalal :Losing Touch?
Sucheta Dalal

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Losing Touch?  

February 9, 2011

Anil Ambani may have failed to assess the possible impact of settling a case with SEBI, but the bar itself on Ambani and his four directors from trading in the market for a year is a sham

The Ambani brothers have always been credited with an extraordinary ability to influence and control the media. But for once, Anil Ambani seems to have failed to assess the impact of ‘settling’ a case with the Securities and Exchange Board of India (SEBI) without admitting or denying guilt. Strangely, he didn’t think that the Rs50-crore settlement and a voluntary agreement by him and four of his directors to keep away from the capital market for a year would make media headlines. Or that news headlines, almost without exception, would report the order as a SEBI ‘ban’ on Anil Ambani and several of his group companies from trading in the market.

A day later, the group’s red-faced media managers were busy extracting clarifications. Anil Ambani even held a press conference and a willing media was happy to report a second round of ‘clarifications’; but, for all practical purposes, the damage was done. Anil Ambani’s retainers have been working for over two years to ensure that SEBI did not prosecute group companies and its directors and that the issue was scrupulously kept out of the media. But let’s examine the contours of the ‘consent order’.

• The ‘consent order’ itself is extremely short on details and SEBI appears to have extracted tough concessions while practically not imposing any restraint at all.

• Note that the order says that Anil Ambani will personally not invest in the market, but there is no restraint on him buying, selling, raising money or issuing shares through investment entities or group companies. In other words, the SEBI officials who framed the consent deal were fully involved in trying to pull the wool over people’s eyes. It is another matter that the media people themselves don’t read these days.

• The consent order provides no details of the market ‘dealings’ that were being investigated by the regulator. So there is no way to judge the extent of mischief that warranted personal action against Anil Ambani and his four top executives.

• The unusual condition that Anil Ambani’s Reliance would rotate auditors and not re-appoint the same auditors for 2011 is a clear indicator that they were sleeping on the job. Yet, SEBI makes no mention of reporting the audit firm/s to the Institute of Chartered Accountants of India.

Given the circumstances, the Rs50-crore settlement may be the highest collected by SEBI, but is small change when you consider what would have been the legal cost of fighting SEBI in court over the next decade or more. For a group that is always swift and nimble about raising funds, it would have meant long delays in getting any approvals or clearances from the regulator, when there was a big investigation pending into foreign accounts and unauthorised trading.

Since it is SEBI which dictates the terms of the ‘consent order’, media headlines weren’t wrong in saying Anil Ambani was barred from the market, but they were certainly wrong in failing to notice that the so-called bar itself was a sham.—
Sucheta Dalal


-- Sucheta Dalal