Post on 07-Apr-2018
8/4/2019 Sebi Consent
1/38
SEBI CONSENT
JIGAR SAIYA
AMIT SANGVI
CHREEN SAVLA
HARDIK SAVLA
PARAS SAVLA
8/4/2019 Sebi Consent
2/38
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
8/4/2019 Sebi Consent
3/38
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
8/4/2019 Sebi Consent
4/38
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
8/4/2019 Sebi Consent
5/38
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.
8/4/2019 Sebi Consent
6/38
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.
8/4/2019 Sebi Consent
7/38
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).
8/4/2019 Sebi Consent
8/38
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
8/4/2019 Sebi Consent
9/38
UK SINHA CHAIRMAN OF SEBI
8/4/2019 Sebi Consent
10/38
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
8/4/2019 Sebi Consent
11/38
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
8/4/2019 Sebi Consent
12/38
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)
8/4/2019 Sebi Consent
13/38
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.
8/4/2019 Sebi Consent
14/38
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.
8/4/2019 Sebi Consent
15/38
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
8/4/2019 Sebi Consent
16/38
RELIANCE SECURITIES
Consent Orders
8/4/2019 Sebi Consent
17/38
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
8/4/2019 Sebi Consent
18/38
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
8/4/2019 Sebi Consent
19/38
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
8/4/2019 Sebi Consent
20/38
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
8/4/2019 Sebi Consent
21/38
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
8/4/2019 Sebi Consent
22/38
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
8/4/2019 Sebi Consent
23/38
Just some of the misleading headlines.
8/4/2019 Sebi Consent
24/38
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
8/4/2019 Sebi Consent
25/38
SEBI PASSES CONSENT ORDER AGAINST
RELIANCE SECURITIES :VIDEO
8/4/2019 Sebi Consent
26/38
HIMACHAL FUTURISTIC CASE WITHCONSENT ORDER
8/4/2019 Sebi Consent
27/38
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.
8/4/2019 Sebi Consent
28/38
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.
8/4/2019 Sebi Consent
29/38
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."
8/4/2019 Sebi Consent
30/38
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.
8/4/2019 Sebi Consent
31/38
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.
8/4/2019 Sebi Consent
32/38
HDFC BANK SETTLES WITH SEBI INIPO CASE
8/4/2019 Sebi Consent
33/38
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.
8/4/2019 Sebi Consent
34/38
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.
8/4/2019 Sebi Consent
35/38
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
8/4/2019 Sebi Consent
36/38
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
8/4/2019 Sebi Consent
37/38
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
8/4/2019 Sebi Consent
38/38