Sebi panel proposes changes to enforcement mechanism

A Sebi panel, headed by retired Supreme Court justice Anil Dave, has proposed several changes to make the regulator’s enforcement mechanism more robust.

The panel has proposed to introduce strategic and systemic changes in the enforcement process to enable Sebi in protecting the investors and indicting the defaulters.

The panel, assisted by Pratap Venugopal, managing partner of K J John & Co, has proposed review of intermediaries regulations to avoid duplicity of legal proceedings before two officials— designated authority and designated member.


“Sebi is required to adhere to the principles of natural justice in the course of its proceedings against an intermediary but such adherence cannot be meant to extend the application to such an extent that permits holding the system hostage at the cost of compromising the very interest of the investors,” said the 424-page report posted on Sebi website. It has invited public comments on the report by July 7.

“It is thus proposed that once the Designated Authority has provided a personal hearing to the intermediary and submitted the report to the Designated Member, in the second stage of enquiry, the Designated Member shall, after issuing a notice to show cause and granting an opportunity of a written submission to the notice, proceed to pass an appropriate order in the matter in the interest of justice, equity and good conscience,” the report said.

The committee said that over a period of time, securities laws violations have become complex and Sebi should prepare in advance for future challenges. It must develop its technical resources to adequately assess and punish defaulters.

“In view of the same, the Committee advocates the use of financial economics as used in other securities jurisdictions and has re-worked the manner of quantification of profit and also provided for quantification of loss caused to the investors along those lines,” the Sebi panel said.