INTENSIVE STUDY COURSE ON SEBI RULES AND REGULATIONS

Transcription

1 1 INTENSIVE STUDY COURSE ON SEBI RULES AND REGULATIONS LIABILITIES UNDER SECURITIES LAWS Presented by: Dipali Sheth, Partner, MDP & Partners

2 2 BACKGROUND The Securities and Exchange Board of India ( SEBI ) was formed in the year SEBI was formed to protect the interests of investors in securities and to regulate the securities market. SEBI has various departments such as market intermediaries, market regulation, investment management, investigations, e nforcement, etc.

3 3 ACTS, RULES AND REGULATIONS SEBI Act; Securities Contract (Regulation) Act, 1956; Depositories Act, 1996; SEBI (Substantial Acquisition and Takeover) Regulations, 2011 ( Takeover Code ); SEBI (Mutual Fund) Regulations, 1996; SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992; SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993;

4 4 ACTS, RULES AND REGULATIONS (continued) SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009; SEBI (Bankers to an Issue) Regulations, 1994; SEBI (Buy-Back of Securities) Regulations, 1998; SEBI (Debenture Trustee) Regulations 1993; SEBI (Foreign Institutional Investors) Regulations, 1995; SEBI (Venture Capital Funds) Regulations 1996

5 5 ACTS, RULES AND REGULATIONS (continued) SEBI (Prohibition of Insider Trading) Regulations, 1992; SEBI (Informal Guidance) Scheme, 2003; SEBI (Intermediaries) Regulations, 2008; SEBI (Portfolio Managers) Regulations, 1993; SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; SEBI (Issue of Sweat Equity) Regulations, 2002; SEBI (Underwriters) Regulations, 1993;

6 6 ACTS, RULES AND REGULATIONS SEBI (Delisting of Equity Shares) Regulations, 2009; SEBI (Depositories and Participants) Regulations, 1996; SEBI (Collective Investment Schemes) Regulations, 1999 (continued)

7 7 VARIOUS INITIATIVES OF SEBI SEBI had taken up with Press Council of India (PCI) its concerns on practice of many media groups entering into agreements, such as Private Treaties, with companies. In this regard, PCI has mandated that all disclosures regarding stake held by the media company should be made in the news report and on the website of media group, including disclosures regarding any potential conflict of interest for media group. In order to curb unauthenticated news related to various scrip s that are being circulated in blogs/chat forums/ etc., by employees of broking houses/other intermediaries, SEBI registered market intermediaries were directed to ensure that proper internal code of conduct and controls be put in place.

8 8 VARIOUS INITIATIVES OF SEBI (continued) SEBI issued a caution to investors on investment advice offered by websites, advertisements, SMS, s, astrology etc. and investors were advised to take well informed investment decisions. The code of conduct for all intermediaries including portfolio managers provides that the intermediary or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media without specified disclosure.

9 9 ROLE OF SEBI Securities Appellate Tribunal ( SAT ) is the appellate authority constituted under the SEBI Act. SAT had in its Order dated November 22, 2004 in JM Mutual Fund and JM Capital Management Private Limited Vs. SEBI Appeal No A/2004 adversely commented on the duty of SEBI and observed that Section 11 of the SEBI Act enjoins duty on SEBI to protect the integrity of the securities market and this duty makes it obligatory on SEBI to ensure that tainted/unaccounted money does not enter securities market. SAT has observed in JM matter (infra) that the expression due diligence has not been defined but it means an obligation to exercise reasonable care and no straight jacket method can be applied with regard to due diligence.

10 10 ROLE OF SEBI In Alka Synthetics Vs. SEBI (2005) 62 SCL 82, the Supreme Court of India observed as follows: the SEBI Act confers wide jurisdiction upon the SEBI. The Board exercises its legislative power by making regulations, executive power by administering the regulations framed by it and taking action against any entity violating these regulations and judicial power by adjudicating disputes in the implementation thereof. The only check upon exercise of such wide ranging power is that it must comply with the Constitution and the Act.

11 11 Enforcement by SEBI In view of the above, SEBI passed an ex-parte ad-interim order dated February 02, 2011 inter-alia debarring thirty nine entities from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions. Further, the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited were directed to examine the role of the stock broker, Arcadia Shares and Stock Brokers Private Limited, in respect of its trading for the entities in the shares of the identified scrips mentioned in this Order and to submit their respective reports within two months from the date of this Order.

12 12 ROLE OF SEBI (continued) In the above-quoted judgment SC had observed that our constitution though does not incorporate the doctrine of separation but does make horizontal division of powers between Legislative, Executive and Judiciary. Hence, it is pertinent to note that SEBI has the following three powers: Legislative; Executive; and Judicial

13 POWERS OF SEBI SEBI is empowered to call for information, undertake inspection, conduct inquiries and undertake audits of persons associated with securities market. Persons associated with securities market as interpreted judicially and subsequently noted is a wider term which includes intermediaries and self regulatory organizations. In Karnavati Fincap Ltd. and Alka Spinners Ltd. Vs. SEBI where in Gujarat High Court held that persons associated with securities market shall include all and sundry who have something to do with the securities market. Further, all activities of selling and buying are related to seller and buyer and hence, it is inconceivable to think that buyer or seller is not person associated with securities market. It was held that it would be defeating to hold investigation into malpractice attached to any transaction or practice carried on in a stock exchange can be made only upto intermediary but cannot 13

14 POWERS OF SEBI Suspension of trading in any security listed on the stock exchange is normally power exercised by stock exchange under the SCRA, however, such power of stock exchange does not preclude SEBI from resorting to such power which is often not taken up as it creates illiquidity of the concerned scrip. SEBI has in past resorted to such action in the interest of orderly development of securities market and especially when it suspected that the trading is conducted for manipulative purposes. SEBI is also empowered to restrain persons from accessing securities market and to prohibit any persons associated with securities market to deal in securities. Normally, SEBI adopts such measure at interim stage. STA has in certain matters set aside such orders on the grounds of it being penal in nature. This power of SEBI is presumed to be with limitation of being imposed only as remedial or preventive measure and not as a penalty. 14

15 POWERS OF SEBI SEBI is empowered to suspend office bearers of stock exchange or self regulatory organisations. In Anand Rathi Vs. SEBI [2002] 110 Comp Cas 837 (Bom), the Bombay High Court held that SEBI being charged with the duty to protect the public and the integrity of the capital markets and as a regulator, it is empowered to order suspension as an interim measure pending investigation into serious allegations including those of manipulations and insider trading. The final restraint order passed by SEBI upon completion of investigation was sustained but modified to restraint on holding public position as a member of governing body or office bearer of the exchange or any capital market related public institution. It is to be noted that such order was sustained primarily on the ground of violation of code of conduct and there was no finding of insider trading or market manipulation. 15

16 16 POWERS OF SEBI SEBI is also empowered to impound, attach and restraint against alienation. In SEBI Vs. Alka Synthetics Ltd., the division bench of Gujarat High Court held that measure taken by SEBI is a remedial measure to preserve the subject matter of dispute till final decision is taken. Oder of attaching bank accounts can however be passed by SEBI only upon approval of the jurisdictional judicial magistrate. Similarly SEBI is empowered to direct a person to not dispose off shares or assets forming part of the transaction. Only remedial and preventive measures can be undertaken by SEBI under Section 11B of the SEBI Act. In Sterlite Industries Vs. SEBI it was observed by SAT that Section 11B of the SEBI Act cannot be interpreted to empower SEBI to issue directions which tantamount to imposition of penalties.

17 17 LIABILITIES UNDER SECURITIES LAW SEBI Act, 1992: (1/9) Failure under this Act or any of the Regulations to: furnish any document, return or report to SEBI, or to file any return or furnish any information, books, etc. within the time specified; or maintain books of accounts or records shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs. 10,000,000, whichever is less.

18 18 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (2/9) Failure to enter into an agreement with its client by any person, who is registered as an intermediary where it is required under this Act or any rules or regulations to enter into such agreement, shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs. 10,000,000, whichever is less. If any listed company or any person who is registered as an intermediary, after having been called upon by SEBI in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by SEBI, such company or intermediary shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs. 10,000,000, whichever is less.

19 19 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (3/9) If any person, who is required under this Act or any rules or regulations to obtain a certificate of registration from the Board for sponsoring or carrying on any collective investment scheme, including mutual funds, sponsors or carries on any collective investment scheme, including mutual funds, without obtaining such certificate of registration, he shall be liable to a penalty of Rs.100,000 for each day during which he sponsors or carries on any such collective investment scheme including mutual funds, or Rs. 10,000,000, whichever is less.

20 20 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (4/9) If a registered collective investment scheme, including mutual funds, for sponsoring or carrying on any investment scheme fails to comply with any of the following, he shall be liable to a penalty of Rs.100,000 for each day during which such failure continues or Rs.10,000,000, whichever is less: fails to comply with the terms and conditions of certificate of registration; or fails to make an application for listing of its schemes; or fails to dispatch unit certificates of any scheme; or fails to refund the application monies paid by the investors;or fails to invest money collected by such collective investment schemes;

21 SEBI Act, 1992: (5/9) If any person, who is registered as a stock broker under this Act, - fails to issue contract notes in the specified form he shall be liable to a penalty not exceeding five times the amount for which the contract note was required to be issued by that broker; fails to deliver any security or fails to make payment of the amount due to the investor in the specified manner, he shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs.10,000,000, whichever is less. charges an amount of brokerage which is in excess of the brokerage specified, he shall be liable to a penalty of Rs.100,000 or five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher. 21 LIABILITIES UNDER SECURITIES LAW (continued)

22 SEBI Act, 1992: (6/9) If any insider indulges in any of the following activities, he shall be liable to a penalty of Rs. 250,000,000 or three times the amount of profits made out of insider trading, whichever is higher: either on his own behalf or on behalf of any other person, deals in securities of a listed company on any stock exchange on the basis of any unpublished price sensitive information; or communicates any unpublished price- sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law; or counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished 22 LIABILITIES UNDER SECURITIES LAW (continued)

23 23 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (7/9) If any person fails to do the following he shall be liable to a penalty Rs250,000,000 or three times the amount of profits made out of such failure, whichever is higher. disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or make a public announcement to acquire shares at a minimum price; make a public offer by sending letter of offer to the shareholders of the concerned company; or make payment of consideration to the shareholders who sold their shares pursuant to letter of offer.

24 24 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (8/9) Where any asset management company of a mutual fund registered under this Act, fails to comply with any of the regulations providing for restrictions on the activities of the asset management companies, such asset management company shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs. 10,000,000, whichever is less. If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of Rs.250,000,000 or three times the amount of profits made out of such practices, whichever is higher.

25 25 LIABILITIES UNDER SECURITIES LAW (continued) SEBI Act, 1992: (9/9) Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by SEBI for which no separate penalty has been provided, shall be liable to a penalty which may extend to Rs. 10,000,000.

26 26 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011: (1/5) SEBI may without prejudice to its powers under the Act, in the interest of investors in securities and the securities market, issue such directions, including, directing divestment of shares acquired in violation of these regulations, whether through public auction or in the open market, or through an offer for sale under the SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2009, and directing the appointment of a merchant banker for such divestiture;

27 27 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011: (2/5) directing transfer of the shares, or any proceeds of a directed sale of shares acquired in violation of these regulations to the Investor Protection and Education Fund established under the SEBI(Investor Protection and Education Fund) Regulations, 2009; directing the target company or any depository not to give effect to any transfer of shares acquired in violation of these regulations; directing the acquirer or any person acting in concert, or any nominee or proxy not to exercise any voting or other rights attached to shares acquired in violation of these regulations;

28 28 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011: (3/5) debarring any person who has violated these regulations from accessing the capital market or dealing in securities for certain period; directing the acquirer to make an open offer for acquiring shares of the target company at such offer price as determined by SEBI; directing the acquirer not to cause, and the target company not to effect, any disposal of assets of the target company or any of its subsidiaries contrary to the contents of the letter of offer, where the conditions specified pertaining to alienation of assets in the proviso to Regulation 25(2) are not met;

29 29 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011: (4/5) directing the acquirer who has failed to make an open offer or has delayed the making of an open offer, to make the open offer and to pay interest at such rate as prescribed by SEBI along with the offer price; directing the acquirer who has failed to make payment of the open offer consideration to shareholders, not to make any open offer or enter into any transaction that would attract the obligation to make an open offer in respect of shares of any target company for specified period; directing the acquirer who has made an open offer but has delayed making payment of the open offer consideration to shareholders, to pay interest at such rate specified by SEBI;

30 30 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011: (5/5) directing any person to cease and desist from exercising control acquired over any target company without complying with the requirements under these regulations; directing divestiture of such number of shares as would result in the shareholding of an acquirer and persons acting in concert with him being limited to the maximum permissible non-public shareholding or below. SEBI is required to comply with principles of natural justice before issuing directions to any person in any such proceeding.

31 31 LIABILITIES UNDER SECURITIES LAW (continued) DEPOSITORIES ACT, 1996 (1/2): Any person who fails to do the following shall be liable to a penalty of Rs. 100,000 for each day during which such failure continues or Rs. 10,000,000, whichever is less for each such failure: furnish information, books, return, etc., or fails to file any return, or fails to maintain books of accounts or records; or As registered as an intermediary fails to enter into agreement; or As an intermediary fails to redress grievances within the time specified by SEBI; or

32 32 LIABILITIES UNDER SECURITIES LAW (continued) DEPOSITORIES ACT, 1996 (2/2): delays in dematerialisation or issue of certificate of securities; or reconcile the records of dematerialised securities with all the securities issued by the issuer; or fails to comply with the directions issued by SEBI under Section 19 of this Act. SAT observed in National Securities Depository Ltd. Vs. SEBI that failure of depository participant of its responsibility to verify applicant s identity cannot lead to liability on the depository on the ground that it is an agent of the depository. The regulations clearly specified the role of each intermediary.

33 33 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 1993: The obligation of Registrar to an Issue ( RTA ) and Share Transfer Agents ( STA ) is to deal with requests for dematerialisation of shares, resolution of queries, transfer of securities, distribution and allotment of shares. RTA and STA are required to maintain records pertaining to allotment of securities, applications received from investors, reasons of applications rejected, refund orders, etc. SEBI vide its circular of December 27, 2002 cancelled the RTA registration of Pinnacle Shares Registry for delaying dematerialisation requests and for rejecting applications of shareholders on improper, false and misleading reasons.

34 34 LIABILITIES UNDER SECURITIES LAW Securities Contracts (Regulation) Act, Any person who fails to comply with any requisition made under this Act (eg: produce books of accounts or other documents at the time of enquiry by competent authority) or enters into any contract in contravention of any of the provisions under this Act (eg: when contracts in notified areas declared as illegal by the Government or certain contracts are prohibited), shall on conviction, be punishable with imprisonment for a term which may extend to ten years or with fine, which may extend to twenty-five crore rupees, or with both.

35 35 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Buy Back of Securities) Regulations, 1998: SEBI may, on failure of the merchant banker to comply with the obligations or failing to observe due diligence, initiate action against the merchant banker in terms of SEBI(Merchant Bankers) Regulations, Such action may include but not limited to cancellation or suspension of registration, prohibition to take up new assignment for specified period, debarring principal officer from being employed with any registered intermediary or other registered person for specified period, debarring branch or office from undertaking any activities for specified period, etc.

36 36 LIABILITIES UNDER SECURITIES LAW (continued SEBI (Merchant Bankers) Regulations, 1992: These Regulations provides that no merchant banker or any of its directors, partner or manager or principal officer shall directly or through their associates or relatives enter into any transaction in securities of companies on the basis of unpublished price sensitive information to which it has access due to its professional assignment. Any default of such obligation may attract any of the actions provided in SEBI (Intermediaries) Regulations, Merchant Bankers are very vital to an issue. As per SEBI (ICDR) Regulations, 2009, other intermediaries to an issue can be appointed only in consultation with merchant banker. Merchant banker is obliged to independently assess the capabilities of other intermediaries before recommending them.

37 37 LIABILITIES UNDER SECURITIES LAW (continued SEBI (Underwriters) Regulations, 1993: An underwriter who contravenes any of the provisions of the Act, Rules or regulations framed thereunder shall be liable for one or more actions specified therein including the action under Chapter V of the SEBI (Intermediaries) Regulations, The underwriter cannot derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under the agreement. The maximum obligation under all underwriting agreements of an underwriter cannot exceed 20 times his networth. Underwriters have to subscribe for securities under the agreement within 45 days of receipt of intimation from the issuer.

38 38 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Intermediaries) Regulations 2008 Where any intermediary fails to comply with any conditions specified in its a certificate of registration or contravenes any of the provisions of the securities laws or directions, instructions or circulars issued, SEBI may, without prejudice to any action under the securities laws or directions, instructions or circulars issued, by order take such action in the manner provided under: suspension of certificate of registration for a specified period; continued

39 39 LIABILITIES UNDER SECURITIES LAW (continued) cancellation of certificate of registration; prohibiting the notice to take up any new assignment or contract or launch a new scheme for the period specified in the order; debarring a principal officer of the notice from being employed or associated with any registered intermediary or other registered person for the period specified in the order; debarring a branch or an office of the notice from carrying out activities for the specified period; warning the notice.

40 40 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999: In case of failure to refund the application money within a period of six (6) weeks from the date of closure of subscription list, the Collective Investment Management Company shall be liable to pay interest to the applicants at a rate of 15% per annum on the expiry of six (6) weeks from the date of closure of the subscription list.

41 41 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (FOREIGN VENTURE CAPITAL INVESTOR) REGULATIONS 2000 Under regulation 20 of this regulations, SEBI has the right to suspend or cancel certificate of registration if the provisions of the SEBI Act or these regulations are not complied with, fails to furnish any information to SEBI or does not submit any periodic returns or reports or does not co-operate in any inquiry.

42 42 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Debenture Trustees) Regulations, 1993: Every applicant eligible for grant or renewal of a certificate shall pay the fees in such a manner and within the period as prescribed. Where the Debenture Trustee fails to pay the fees the Board may suspend the certificate, whereupon the Debenture Trustee shall cease to act as a debenture trustee. SEBI has initiated action in past against debenture trustees for their failure to convey accurate information to investors, delay in taking steps to secure the assets of the defaulting companies, failure to monitor default and taking remedial steps

43 43 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Mutual Funds) Regulations, 1996 (1/3) SEBI may not permit a mutual fund who has not paid service fee to launch any scheme The mutual fund and asset management company shall be liable to refund the application money to the applicants, if the mutual fund fails to receive the minimum subscription amount specified; if the moneys received from the applicants for units are in excess of subscription as specified. Such amounts are refundable within a period of 5 working days from the date of closure of subscription list failing which the asset management company shall be liable to pay interest to the applicants at a rate of fifteen per cent per annum from the expiry of [five working days] from the date of closure of the subscription list.

44 44 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Mutual Funds) Regulations, 1996 (2/3) Every mutual fund and asset management company shall: despatch to the unit holders the dividend warrants within 30 days of the declaration of the dividend and despatch the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase; in the event of failure to despatch the redemption or repurchase proceeds within specified period, the asset management company shall be liable to pay interest to the unit holders at such rate as may be specified by SEBI;

45 45 LIABILITIES UNDER SECURITIES LAW (continued) SEBI (Mutual Funds) Regulations, 1996 (3/3) Notwithstanding payment of such interest to the unitholders, the asset management company may be liable for penalty for failure to despatch the redemption or repurchase proceeds within the stipulated time. A mutual fund contravenes any of the provisions of the SEBI Act and these regulations or fails, to furnish any information or furnishes wrong information relating to its activity as a mutual fund as required under these regulations or to submit periodical returns or does not co-operate in any inquiry or inspection or to resolve the complaints of the investors or indulges in unfair trade practices in securities, etc. shall be liable to action provided under the SEBI (Intermediaries) Regulations, 2008.

46 46 RECENT IMPORTANT DECISIONS In Price Waterhouse & Co. and Others Vs. SEBI [2010] 103 SCL 96 (Bom) The Bombay High Court. it is true that the petitioners may not have any direct association with he securities market since they were performing their duties as an auditor of the company and preparing balance sheet. It is however required to be noted that normally an investor would invest monies after assessing the financial health of the company on the basis of balance sheet..further, the investor may consider to invest if the balance sheet is certified by reputed CAs and reflects that the financial position is sound. continued

47 47 RECENT IMPORTANT DECISIONS In Price Waterhouse & Co. and Others Vs. SEBI [2010] 103 SCL 96 (Bom) continued Considering the said aspect even though the petitioners may not have direct association in the share market activities, yet the statutory duty regarding auditing the accounts of the company and preparation of balance sheets may have direct bearing in connection with the interests of the investors and the stability of the securities market. In our view, the petitioners in their capacity as auditors of the company Satyam which was at one point of time considered to be a blue chip company who had a defining influence on the securities market can be said to be persons associated with the securities market within the meaning of the provisions of the SEBI Act.

48 48 RECENT IMPORTANT DECISIONS In SEBI Vs. Shriram Mutual Fund AIR 2006 SC 2287, a mutual fund conducted business through brokers associated with its sponsors in excess of permissible limits. The mutual fund also failed to comply with the terms and conditions of certificate of registration. The question had arisen before SC was whether the imposition of penalty becomes sine qua non of violation and intention of the parties committing violation becomes irrelevant or not, once it is established that the mutual fund has violated terms of certificate of registration. The SC held that mens rea is not essential in imposing liability for breach of civil obligation as opposed to criminal obligation. Hence, once contravention is established then penalty is to follow.

49 49 RECENT IMPORTANT DECISIONS In Ranjana Kothari Vs. SEBI Appeal No. 125 of 2001, SAT Order dated August 26, 2011, SAT observed as follows: Before concluding, we may observe that the SEBI only initiated adjudication proceedings against the appellants and was satisfied by imposing small amounts of penalties on the delinquents (appellants). The appellants who purchased shares while in possession of unpublished price sensitive information are still continuing to enjoy the fruits of the ill-gotten gains that they have made.this was a fit case where SEBI also should have initiated proceedings under Section 11 and 11B of the SEBI Act for issuing appropriate directions to the appellants and other insiders to ensure that they do not take advantage of their wrong doing. It is only through such directions that they could have been directed to disgorge their ill-gotten gains

50 50 THANK YOU Presented by: Dipali Sheth Partner MDP & PARTNERS Advocates & Solicitors 1st floor, Udyog Bhavan, 29, Walchand Hirachand Marg, Ballard Estate, Mumbai Tel: I Fax: dipali@mdppartners.com Website: -

51 51 For private circulation only All rights including copyright, in the content of this document are owned or controlled by MDP & Partners (MDP) and are for the reader s personal noncommercial use. The contents of this document are for informational purposes only and do not constitute legal advice. The views expressed are not intended to address the circumstances of any particular individual or entity. The contents are intended but not guaranteed, to be correct, or complete, or up to date and MDP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident or any other cause. It is prepared by MDP only for a presentation in a seminar of WIRC. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.