Most pending cases at SEBI more than two years old

Investigations and case proceedings take a lot of time at the Securities and Exchange Board of India (SEBI) with a bulk of the pending cases being more than two years old.

Data from the capital market regulator’s latest annual report suggests that most of the pending cases across enforcement categories such as enquiry, adjudication or summary proceedings fit into the period.

According to SEBI’s annual report for 2015-16, there were a total of 1,205 adjudication proceedings pending as on March 31, 2016, out of which 691 — 57 per cent of all such cases — were in that category. While there were only 216 adjudication cases that are less than one year old, 298 cases were older than one year but less than two years.

In the case of summary proceedings, there was a total of 83 pending cases as on March 31, 2016, and all such cases are more than two years old. Incidentally, data from past annual reports suggest that most of these 83 cases belong to the period 2003-04 and 2005-06 and are more than a decade old now.

Monetary penalties

Summary proceedings refer to an enquiry or adjudication against SEBI-registered intermediaries and issuing a warning and deficiency letter for violation of applicable guidelines.

Under enquiry proceedings, SEBI can suspend or cancel the registration of a market intermediary while adjudication proceedings mostly lead to monetary penalties post the completion of investigations.

SEBI can also initiate legal proceedings against any person for violating provisions of the SEBI Act, 1992 under prosecution proceedings.

“Due to the undue delay in investigation, not only the whole purpose of investigation gets defeated but also the necessary preventive measures cannot be taken in time to curb the malpractices in the market,” says Sumit Agrawal, Partner, Suvan Law Advisors and a former SEBI law officer.

An email query sent to SEBI regarding the reasons for delay remained unanswered. Interestingly, the Securities Appellate Tribunal, which is the body that hears appeals filed against SEBI orders, has also pulled up the regulator in the past for such delays in investigations.

In a matter related to HB Stockholdings Ltd., the appellate noted that such delays lead to the risk of not only losing evidence since the documents may get destroyed but also innocent entities may be forced to pay a price for a violation they never committed.

“Such systemic failures occur to the disadvantage of all parties concerned and lead to consequences such as genuine violators being allowed to function normally in the capital market for years altogether, whereas in some situations the reputation of innocent entities gets tarnished as they wait for the wheels of justice to turn a bit faster than the pace at which they seem to be going,” it said.

Not alone

“Sufficient details about the age of cases are no longer available as SEBI has changed the format in which data is given out in the annual report. So it is difficult to say whether old or new cases have been settled. These are important numbers but not there in the latest annual report,” says Sandeep Parekh, founder, Finsec Law Advisors and a former SEBI Executive Director.

The Indian regulatory body is not alone when it comes to the issue of slow enforcement. A preliminary report by a Treasury committee in the U.K. alleged that the Financial Services Authority (FSA) was slow in probing the Libor scandal, which came out in the open for the first time in 2008. FSA denied the allegations.

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Printable version | Aug 1, 2021 5:29:24 PM |

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