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JIGAR SAIYA AMIT SANGVI CHREEN SAVLA HARDIK SAVLA PARAS SAVLA
CONSENT ORDER
Consent
Order means an order settling administrative or civil proceedings between the regulator and a person (Party) who may prima facie be found to have violated securities laws. may settle all issues or reserve an issue or claim, but it must precisely state what issues or claims are being reserved.
It
A Consent
Order may or may not include a determination that a violation has occurred
OBJECTIVE OF
CONSENT ORDER
Is
to reduce the regulatory costs which can further help in saving time and effort of Securities Exchange Board of India flexibility of wider array of enforcement actions to achieve the twin goals of an appropriate sanction and deterrence without resorting to a long drawn litigation before SEBI / Tribunal / Courts
Provide
POWER TO PASS CONSENT ORDERS The Parliament of India has recognized SEBIs powers to pass an 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
Consideration of the amount of investors harm 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 by the 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.
can make an application proposing administrative/civil consent by writing to the Division of Regulatory Action, Enforcement Department at SEBIs Mumbai address. compounding is proposed by a party, such application may be made to the court and a copy can be addressed to the Division of Prosecution, Enforcement Department at SEBIs Mumbai address. (addresses given at the bottom of this document).
Where
Division of Regulatory Action Enforcement Department Securities and Exchange Boardof India C4A, G Block Bandra Kurla Complex Bandra (East) Mumbai 400051
Division of Prosecution Enforcement Department Securities and Exchange Board of India C4A, G Block Bandra Kurla Complex Bandra (East) Mumbai 400 051
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
According to
him, maintaining consistency of the regulator's predictability based on certain evidences and offences is an important criterion. 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
Introduced
Data
with Sebi show that a large number of market entities facing regulatory action, including prosecution and adjudication, opt for the consent route to end the ordeal that, at times, can continue for years. This money goes directly to the Consolidated Fund of India. Sebi has also been able to collect nearly Rs 29 crore as disgorgement amount from those named in the IPO (initial public offer) scam. The amount collected has been distributed to the victims of the scam.
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 236 applications being rejected.
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 as manipulation of prices, IPO manipulation, etc, affecting adversely the interests of the investors are settled by consent terms
RELIANCE SECURITIES
Consent Orders
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 listed securities in the secondary markets till December 2012. Specified Directors will not make investment in listed securities in the secondary markets till December 2011
A Panel consisting of Whole 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.
SEBI In 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."
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 of money to corporate entities connected with him.
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.
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.
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.
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 retail investors during 2003-05. While the proceeding were on, HDFC Bank proposed settlement of the issue through a consent order which was accepted by the committee of SEBI
Cases involving serious offences such as manipulation of prices, IPO manipulation, etc, affecting adversely the interests of the investors are settled 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