Tribunal pulls up SEBI for lack of uniformity in penalising players

A recent order by the Securities Appellate Tribunal (SAT) has brought to the fore the issue of lack of uniformity in actions taken by the Securities and Exchange Board of India (SEBI) in similar offences by different market participants.

Hearing an appeal filed by Almondz Global Securities Ltd, the tribunal quashed the remaining punishment against the merchant banker after highlighting the fact that similar offences by other entities saw a much lenient penal action by SEBI officials.

In December 2011, SEBI issued an interim order barring the merchant banker from taking any new assignment till further directions. The final order was issued only in March 2014 barring the banker for six months.

The SEBI probe found that the banker did not do proper due diligence while managing the public issue of Bhartiya Global Infomedia. The tribunal, in its order, said that it does not feel that the violation by Almondz Global was so grave to invite such a “severe punishment.”

It cited similar violations by other merchant bankers like Axis Capital, SBI Capital Markets, Edelweiss Financial Services, Keynote Capital and Chartered Capital and Investment and noted that none were suspended from taking new assignments till the probe was over.

This is not the first time that the tribunal has highlighted the lack of uniformity in actions taken by adjudicating officers of SEBI.

Incidentally, in August 2014, it even went to the extent of saying that if adjudicating officers rely on orders passed by other officials, then such orders should be taken into account before passing the final order. Further, if the officer disagrees with an earlier order, then the reasons should be recorded, it said.

“If every adjudicating officer of SEBI passes independent order without bothering to consider decision taken by another adjudicating officer of SEBI in similar set of circumstances, then there would be complete chaos and total lawlessness,” said the tribunal while hearing the appeal filed by R M Shares Trading Pvt Ltd.

An email query sent to SEBI asking whether there exists any protocol within the regulatory body to ensure uniform action against similar offences by market participants remained unanswered till the time of going to press. There is no uniform standard of due diligence expected of merchant bankers in a public issue process,” says Vaneesa Agrawal, a former SEBI official.