sebi consent

8/4/2019 Sebi Consent

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SEBI CONSENT

JIGAR SAIYA

AMIT SANGVI

CHREEN SAVLA

HARDIK SAVLA

PARAS SAVLA


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CONSENT ORDER

Consent Order means an order settlingadministrative or civil proceedings between the

regulator and a person (Party) who mayprima

faciebe found to have violated securities laws.

It may settle all issues or reserve an issue or claim,

but it must precisely state what issues or claims are

being reserved.

A Consent Order may or may not include a

determination that a violation has occurred


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OBJECTIVE OF CONSENT ORDER

Is to reduce the regulatory costs which can further

help in saving time and effort of Securities Exchange

Board ofIndia

Provide flexibility of wider array of enforcement

actions to achieve the twin goals of an appropriate

sanction and deterrence without resorting to a longdrawn litigation before SEBI / Tribunal / Courts


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POWER TO PASS CONSENT ORDERS

The Parliament ofIndia has recognized SEBIs powers to passan order with consent of the parties. This will of the Parliament

is clear from the words of Section 15T of the SEBI Act

1992. Section 15T(2) of the SEBI Act reads as under: 15T (2)

No appeal shall lie to the Securities Appellate Tribunal from an

order made

(a) by the Board on and after the commencement of the Securities

Laws (Second Amendment) Act, 1999;

(b) by an adjudicating officer, with the Consent of the parties.

Thus, the Parliament in its wisdom has recognized that

SEBI and its authorized delegate have power to pass consent

orders. Similarly, courts have well recognized inherent powers

to settle a case before them on an application made by the

parties


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FACTORS FOR PASSING CONSENT

ORDER

Whether violation is intentional.

Partys conduct in the investigation and disclosure of full

facts.

Gravity of charge i.e. charge like fraud, market manipulationor insider trading

History of non-compliance. Good track record of the violator

i.e. it had not been found guilty of similar or serious

violations in the past. Whether there were circumstances beyond the control of the

party

Violation is technical and/or minor in nature and whether

violation warrants penalty.


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Consideration of the amount of investorsharm or partys gain.

Processes which have been introduced since the violation to

minimize future violations/lapses. Compliance schedule proposed by the party

Economic benefits accruing to a party from delayed or avoided

compliance.

Conditions where necessary to deter future non-compliance bythe same or another party.

Satisfaction of claim of investors regarding payment of money

due to them or delivery of securities to them.

Compliance of the civil enforcement action by the accused. Party has undergone any other regulatory enforcement action

for the same violation.

Any other factors necessary in the facts and circumstances of

the case.


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PERSON PROPOSE TO CONSENT

A person can make an application proposingadministrative/civil consent by writing to theDivision of Regulatory Action, Enforcement

Departmentat SEB

Is Mumbai address.

Where compounding is proposed by a party, suchapplication may be made to the court and a copy can

be addressed to the Division ofProsecution, Enforcement Department at SEBIsMumbai address. (addresses given at the bottom ofthis document).


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ADDRESSES FOR CORRESPONDING:

For consent orders (civiland administrative)

Division of Regulatory ActionEnforcement Department

Securities and ExchangeBoardofIndia

C4A, G Block

Bandra Kurla ComplexBandra (East)

Mumbai 400051

For prosecution cases(criminal)

Division of ProsecutionEnforcement Department

Securities and Exchange Board ofIndia

C4A, G Block

Bandra Kurla ComplexBandra (East)

Mumbai 400 051


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UK SINHA CHAIRMAN OF SEBI


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SEBI'S CONSENT ORDER MECHANISM

SPEED UPS

When UK Sinha took over as the chairman of

securities market regulator, Sebi, he seeked a

review of the consent order mechanism to ensure

uniformity.

There has been praise for the speedy settlement

of cases thanks to mechanism.

"There is a perception that in the consent route,

there is a high degree of subjectivity. So a

consistency is perhaps lacking," Sinha had told


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According to him, maintaining consistency of

the regulator's predictability based on certain

evidences and offences is an important criterion.

Introduced in 2007, Sebi's consent order

mechanism is modelled on the lines of the US

Securities and Exchange Commission's

settlement system offering fast remedies to cases


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SEBI COLLECTS OVER RS 150 CR

THROUGH CONSENT ORDERS

MAKING PEACE

No of consent applications received 2,220

No of applications approved by HPAC 1,023No of applications disposed 982

No of applications rejected 681

Disgorgement amount received Rs 28.97 cr

Settlement charges Rs 151.78 cr*

Legal/Administrative charges Rs 1.09 cr

* Includes Rs 50 cr R-Infra,RNRL consent order (Between Apr 2007 and Dec 2010)


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Data with Sebi show that a large number of market

entities facing regulatory action, including

prosecution and adjudication, opt for the consentroute to end the ordeal that, at times, can continue

for years.

This money goes directly to the Consolidated Fund

ofIndia.

Sebi has also been able to collect nearly Rs 29

crore as disgorgement amount from those named in

theIPO (initial public offer) scam.

The amount collected has been distributed to the

victims of the scam.


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Experts say the consent route helps the regulator

overcome the long-drawn process involving the

regulator

The consent order scheme, not surprisingly, has

progressively been becoming popular with the

offenders. In fact, in 2008-09 , the number of applications

filed for consent orders rose sharply to 666 from

81 in the previous year, with disposal of 428

applications being disposed of and 236applications being rejected.


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While the intention of the scheme was to expedite

disposal of minor cases, avoiding the long-drawn

litigation process, many high-profile cases involving

serious offences are opting for consent terms.

Cases involving serious offences such asmanipulation of prices, IPO manipulation, etc,

affecting adversely the interests of the investors are

settled by consent terms


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RELIANCE SECURITIES

Consent Orders


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SEBIConsent Guidelines - Background

SEBI Consent guidelines introduced in April, 2007

Consent philosophy in line with regulatory practices in

developed markets

US SEC settles over 90% of cases through consent orders

SEBI has passed over 1,000 consent orders in the past

nearly 4 years More than 1 per day on average


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Consent - SEBIs Stated Objectives

Avoiding long drawn litigation before SEBI / SAT / Courts

Reduction of regulatory costs

Saving of time and efforts in relation to enforcement action

Appropriate deterrence through payment of consent fee, etc


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Consent Companies Objectives

Application made without admitting or denying guilt

Avoid long drawn litigationbefore SEBI / SAT / HC / SC

Avoid distraction of management time

Avoid huge legal costs

End regulatory uncertainty in the interest of all stakeholders

Avoid unwarranted and speculative trialby media running

over a period of several years


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Preserve growth prospects fully

Maintain full financial flexibility to implement existing and

future projects

No burden on Companies

No compromise to interests of investors and all other

stakeholders

Consent Companies Objectives


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The consent Order.

Reliance Securities did not have documentary proof like

leave and lease licenses approved for payments, rent or

ownership of office.

The fact that the reliance Securities collected cheques in

the name of Reliance Money, applicant collected excesssecurities transaction tax from clients during 2006-

2008.

SEBI had sent them a showcase notice. This was for a

period of April 1, 2007 to March 31, 2009. In the audit,which they did at that point of time, they have found

prima facie violations of code of conduct on behalf of

Reliance Securities and the investigation proceeded

from there


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Consent Terms

Stop new registrations of clients for the next 45 days

To pay a fine of Rs 25 lakh

To spend nearly Rs 1 crore on investor education

going forward.

RInfra will not make investment in listedsecurities

in the secondary markets till December 2012.

Specified Directors will not make investment in

listedsecurities in the secondary markets till

December 2011


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Just some of the misleading headlines.


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The Facts are Completely different to reports

FACT 1 : SEBI has NOTbanned / debarred RInfra, RNRL, AnilAmbani, other Directors from capital markets

FACT 2 : SEBI has NOTbanned / debarred RInfra, RNRL, AnilAmbani, other Directors from stock markets

FACT 3 : SEBI has NOTbarred Indian Billionaire from stockmarkets

FACT 4 : SEBI has NOTbarred Anil Ambani from market

FACT 5 : SEBI has placed NO restrictions on raising of equityand debt resources by any Reliance ADA Group company orindividual


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SEBI PASSES CONSENT ORDER AGAINST

RELIANCE SECURITIES :VIDEO


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HIMACHAL FUTURISTIC CASE WITHCONSENT ORDER


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SETTLEMENT OFHIMACHAL

FUTURISTIC CASE

Market Regulators Have Alleged Indulgence In Creation Of

Artificial Market And Price Manipulation Through Off-market

TransactionsIn Scrip Of Himachal Futuristic Communications

Ltd.

The Securities and Exchange Board ofIndia (SEBI) has

disposed proceedings against Himachal Futuristic

Communications Ltd (HFCL) in the 2001 share

price manipulation case, with a consent order.


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A Panel consisting ofWhole Time Members, SEBl, Dr. K. M.

Abraham and Shri Prashant Saran has passed consent order

dated January 28, 2010 on the applications submitted by

Himachal Futuristic Communications Ltd. (HFCL) and others

in the matter of Himachal Futuristic Communications Ltd. in

accordance with SEBl Circular dated April 20, 2007 for consent

orders.

The applicants have remitted a sum of Rs ten crore towards

settlement charges and have filed an undertaking that the

amount paid towards settlement charges are made out of the

funds of the promoters and not HFCL.


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CONSENT ORDER ON THE APPLICATIONS

SUBMITTED BY HIMACHAL FUTURISTIC

COMMUNICATIONS LTD.

SEBIIn An Order CO/ID2/739/332/2010 Dated 28

January 2010, Said: "This Consent Order Disposes Of

The Above Mentioned Proceedings Under Sections 11(4)(B) And 11B Of SEBI Act, 1992 Read With Regulation

11 Of SEBI (Prohibition Of Fraudulent And Unfair Trade

Practices Relating To Securities Market) Regulations,

2003, Pending Against The Applicants Named Above In

The Matter Of Himachal Futuristic Communications

Ltd."


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The HFCL case dates back to the 1999 to 2001 period of the

Ketan Parekh scam.

Mr Parekh, the main accused in the fraud, allegedly

rigged share prices of ten companies, including Zee Telefilms

and HFCL.

Global Trust Bank (GTB), Zee Telefilms and HFCL were in

cahoots with Mr. Parekh and had all routed large sums ofmoney to corporate entities connected with him.


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In 2001, SEBI had told the Joint Parliamentary Committee

that Zee and HFCL had diverted Rs515 crore and Rs700 crore

respectively to Mr. Parekh.

HFCL proposed a settlement of the proceedings through a

consent order on 31 may 2008 and 4 June 2004

On 11 January 2010, the Delhi High Court also affirmed the

terms of the settlement as recommended by the High-Powered

Committee and approved by SEBI, following which the

market regulator disposed proceedings against HFCL.


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HDFC BANK SETTLES WITH SEBI INIPO CASE


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The Sebi order says that it had launched an investigation into

share dealings in shares issued through IPOs during 2003-05.

It was discovered that people had opened multiple accounts

giving false names and addresses, where the beneficiary was

the same

The scam involved tens of thousands of benami demat

accounts with common addresses that cornered company

shares set aside for small investors in IPOs. In April 2006

Sebi had come down heavily on all market intermediaries,

who were found negligent. Sebis investigation found that

HDFC Bank had also opened several such demat accounts

and violated various provisions.


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Sebi had passed an initial order in April 2006 prohibiting

HDFC Bank from opening new demat accounts, which was

revoked in November 2006 after hearings.

The High Powered Advisory Committee, which decides on

settlement of cases, recommended it for settlement. The

consent order came into effect on December 22.

Market regulator SEBI has freed the HDFC Bank in the initial

public offering (IPO) scam case on payment of consent fee of

Rs 1 lakh.


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The consent order was passed by SEBI in the IPO case for

opening demat accounts with common addresses in fictitious

names with the intention of cornering shares meant for retailinvestors during 2003-05.

While the proceeding were on, HDFC Bank proposed

settlement of the issue through a consent order which wasaccepted by the committee of SEBI


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REVISIT SEBI'S CONSENT ORDERS

Consent order scheme was introduced in April 2007with a view to clearing the huge backlog of cases

without much delay through an alternative route of

dispute resolution

The consent order scheme, not surprisingly, has

progressively been becoming popular with the

offenders

While the intention of the scheme was to expedite

disposal of minor cases, avoiding the long-drawn

litigation process, many high-profile cases involvingserious offences are opting for consent terms


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Cases involving serious offencessuch as

manipulation of prices, IPO manipulation, etc,

affecting adversely the interests of the investors aresettled by consent terms

In the recent notorious case of Satyam Computers

involving a fraud of over Rs 8,000 crore, its auditors,PricewaterhouseCoopers, have filed an application

for consent order to explore and bring to a close the

issues they have with the market regulator as a

fallout of the scam


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sebi consent

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