SAT settles SEBI-broker dispute over interest calculation

Bone of contention:SEBI and Prebon Yamane (India) could not agree on the amount payable by the brokerage.Reuters

Bone of contention:SEBI and Prebon Yamane (India) could not agree on the amount payable by the brokerage.Reuters  

Prebon Yamane directed to deposit Rs. 10 lakh before April 30

How difficult is it to calculate simple interest? Quite difficult, if a recent case that landed at the Securities Appellate Tribunal (SAT) is anything to go by.

The tribunal, which had heard and disposed of many complex regulatory matters, was forced to calculate simple interest in a matter after the Securities and Exchange Board of India (SEBI) and broker Prebon Yamane (India) failed to arrive at a consensus on the manner and the amount on which simple interest had to be calculated.

“... we find that parties are not clear as to how simple interest at relevant bank rate is to be calculated,” said the SAT bench comprising Presiding Officer Justice Tarun Agarwala and members C. K. G. Nair and Justice M. T. Joshi, adding that “simple interest was required to be calculated which the parties have failed to calculate in the correct perspective.”

In 2004, SEBI had raised a demand of Rs. 4.64 crore against Prebon Yamane (India) towards principal amount and the interest as fees under the broker regulations. Prebon Yamane, however, challenged the demand at the tribunal that directed the regulator to refund the money that was already paid by the broker.

Meanwhile, SEBI challenged the tribunal’s order in the Supreme Court, which allowed the broker to withdraw the amount deposited with the tribunal till the matter was pending at the apex court. As per the apex court’s direction, the broker withdrew Rs. 6.20 crore that included the principal amount and the interest accrued.

In December 2016, the Supreme Court ruled in favour of SEBI and hence the demand raised in 2004 became payable along with interest. Thereafter, the capital markets regulator directed the broker to deposit Rs. 11.60 crore that was disputed by the brokerage that said it was liable to pay only Rs. 6.20 crore along with simple interest and hence deposited Rs. 8.15 crore.

SEBI, however, informed that the broker was liable to pay a balance amount of Rs. 1.10 crore, which was challenged by the broker at the tribunal.

Based on the tribunal’s order, while Prebon Yamane deposited Rs. 56.61 lakh, SEBI said that the brokerage needed to pay an additional Rs. 39.03 lakh. Since there was a conflict on calculation of rate of interest, the brokerage filed a miscellaneous application at the tribunal for clarification.

While disposing the matter, the tribunal directed the market intermediary to deposit Rs. 10 lakh before April 30, failing which the SEBI would be allowed to recover the entire amount of Rs. 39.03 lakh.

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