Sebi plans to approach the government seeking amendments to securities law for more clarity on adjudicating officers’ discretionary powers in determining the quantum of monetary penalty in cases of violations.
The move comes after the Supreme Court recently rejected the regulator’s plea that an adjudicating officer has discretion to fix the penalty amount under a particular provision of the Sebi Act.
Besides, the apex court had said pursuant to Sebi (Amendment) Act 2002 and prior to the Amendment Act of 2014, the discretion of adjudicating officers was taken away and effectively restored through the amendment in 2014.
In the matter of Roofit Industries, Sebi had challenged Securities Appellate Tribunal’s decision to reduce the fine amount. While rejecting the plea, the Supreme Court did not accept that “section 15J (of the Sebi Act) gives discretion to adjudicating officers” to decide the penalty quantum.
A senior official said the court’s conclusion has led to a situation where heavy penalties were imposed even for minor breaches in matters of violations during 2002-2014 period.
Besides, the Securities and Appellate Tribunal (SAT) has remanded back several orders of Sebi for passing fresh orders causing delays in disposal appeals.
As many as 36 cases have been remanded back to Sebi for passing fresh orders by the tribunal. Also, around 3,000 adjudication actions remain pending as on March this year, of which 90 per cent pertain to the period between 2002 and 2014, according to the official.
Against this backdrop, the official said Sebi plans to approach the government for necessary amendments in existing regulations to ensure that there is more clarity with respect to exercise of discretionary powers of adjudicating officers.
Sebi board is likely to discuss a proposal in this regard during its meeting this week, the official added.
Amendments are being proposed to provisions in three laws — section 15 J of Sebi Act, section 23 J of Securities Contracts Regulation Act, 1956 and section 19-I of the Depositories Act, 1996.
This would help clarify that “adjudicating officer shall have and shall always deemed to have had the power to exercise discretion to determine the quantum of monetary penalty subject to the maximum limit provided in each section”, the official said.
In the order, passed in November 2015, the Supreme Court had concluded that when section 15A (a) of Securities And Exchange Board of India Act, 1992 (Sebi Act) is read along with provision of section 15 J (factors to be taken into account by adjudicating officer), then there is no scope for discretion.
Under these provisions, the fine has to be either Rs 1 lakh for each day of violation or Rs 1 crore, whichever is less. Violations exceeding 100 days would attract Rs 1 crore penalty.