In order to increase competence and make its functioning thorough, capital market regulator Securities and Exchange Board of India (Sebi) has started hiring services of outside lawyers. Till recently, in most cases, Sebi relied on the findings of its own inquiry officer as well as the arguments put forward by the defence counsel before issuing an order.
A senior Sebi official said the regulator often faced the challenge of countering arguments put forward by well-established legal experts who are hired by individuals and entities against whom Sebi had initiated action. He said lack of experience as well as expertise in certain matters of its in-house team often made the Sebi?s case weaker. ?This is one reason why we felt it necessary to seek outside expertise to effectively counter the defendant?s argument,? said the official, adding the regulator was following this practice on important cases. ?This will bring in more professionalism and reduce bias,? he said.
Agreed Sandeep Parekh, founder of Finsec Law Advisors and former ED of Sebi: ?It will bring more competence on the table.? RS Loona, managing partner Allianz Corporate Lawyers and also former ED of the regulator, said the move was in the right direction and would certainly give the regulator more teeth. ?When a case is heard before Sebi, many legal and non-legal issues used to emerge. Sebi?s internal expertise was not sufficient enough to handle all these issues.
In these scenario, engaging advocates from outside will help them in countering legal points more effectively,? said Loona. This will also allow the Sebi member hearing the case to approach the issue independently, he added.
In its order passed last week, rejecting Price Waterhouse?s plea to cross-examine former chairman of Satyam Computers Ramalinga Raju and his aides in the multi-crore scandal, the regulator had engaged the service of Bombay High Court advocate Shiraz Rustomjee to present its case before Sebi?s Whole Time Member MS Sahoo. Price Waterhouse, which audited the accounts of Satyam, was well-represented by senior advocates Janak D Dwarkadas, Navroz H Seervai and Shyam Mehta, who were assisted by partners of J Sagar and Associates. Similarly, Sebi used the services of Bombay High Court advocate Kumar Desai in its arguments against the promoter of Pyramid Symira Theater for inflating its books. The regulator has also engaged an outside advocate to represent it in its ongoing actions initiated against ADAG group chairman Anil Ambani and other senior executives of Reliance Infrastructure and RNRL for their alleged violations of overseas debt norms.
Sebi is empowered to issue directions under Sections 11 and 11B of the Sebi Act asking people not to deal in securities or to access capital markets either directly or indirectly. Chapter VIA of the Sebi Act, 1992 empowers adjudicating officers, who are employees of regulator, acting as quasi-judicial officers to impose civil monetary penalties. These penalties can be as high as Rs 25 crore or three times the benefit gained due to the violation.