I had an occasion to go through the website of SEBI recently which exhibits hundreds of ‘Consent Orders’. These orders are nothing but culmination of discussion between SEBI and the offenders. They come to an understanding. Based on this understanding the offender agrees to pay SEBI a certain sum and gives a letter to this effect. SEBI then gives its consent through these ‘Consent Orders’.
Normally a fine or penalty or a punishment shall be clearly spelt in an Act in such a manner that it does not give any room for its misuse by the implementing officers. In most of the enactments there is specific mention about the quantum of penalty or fine for a particular default.
Unfortunately in SEBI Act this is missing. Only a higher ceiling, which runs in to Crores, is found in the SEBI Act. Fines for most of the orders are subjective giving lot of room for corruption and they do not come under any scanner. In several cases of consent order involving defaults / non compliance / frauds, one can see a paltry penalty agreed to between SEBI and the defaulter. As these consent orders are subjective orders, it makes one to question whether SEBI has actually taken Investors’ interest and the magnitude of non compliance or fraud into consideration while giving its consent through these orders.
We need to have a very strong debate on issue of Consent orders by SEBI. The SEBI Act needs immediate amendment specifying penalty which are commensurate with the nature of offences and under no circumstance it shall be subjective.
SEBI subjectiveness can be gauged from the speed with which it published Hon’ble Madras High Court order against Coimbatore Stock Exchange on 25.8.2006 in its website. On appeal the same High Court gave direction to SEBI to consider the application of Coimbatore Stock Exchange and pass necessary orders before 31.3.2009. As this is against SEBI this order, which was passed by the Court on 6.1.2009, was not published in its website.
So far there is no news whether SEBI carried out the direction of Hon’ble Madras High Court before 31.3.2009 in the absence of any news on its website.
It has been the practice of SEBI to publish only favourable news and black out unfavourable one from public gaze. What a transparant organisation !
Let us hope Finance Ministry soon gives its consent for scrapping these consent orders and amend SEBI Act suitably.
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