Sebi makes consent guidelines tough; won't please India Inc
Sebi has amended the five-year old consent guidelines where the market regulator had barred consent orders for offenses like insider trading, serious fraudulent and unfair trade practices, reports CNBC-TV18’s Sajeet Manghat.
Not many in the corporate India would be happy with that kind of consent guidelines, which was brought in April 2007. What Sebi has done is carved out niche areas, which will never go for consent. These are some of the serious areas like insider trading, serious fraudulent and unfair trade practices, front-running and defaults, which have led to investor losses. It also covers ICDR and debt servicing guidelines, which means that all the IPO processes, any serious shortcomings in the prospectus will not go for consent.
That means that people have to be very careful when Sebi comes out with these show-cause notices because it would mean they can’t go for any crime to Sebi for consent. Sebi will have reservations to look at only milder cases and severe cases will not be part of these consent proceedings.
What Sebi also has done is that it has given some more transparency to the entire structure of consent because there were a lot of PILs which were coming in on the way the consent has been done and UK Sinha has been vocal about the fact that there is no structure to the consent orders, which are coming from Sebi. So these detailed guidelines which will take into effect immediately will close the door for many serious capital market crimes which are happening today.
Cyril Shroff the managing partner at Amarchand Mangaldas says, “It brings more predictability and transparency to the process, it carves out certain types of offenses or violations which cannot be compromised to a short-cut. But equally I think it puts in place for rigorous process by which a settlement can take place. It will induce a sort of behaviour by which people can't in the market feel that no matter what we can do whatever we want and just settle it later. In a broader sense it is quite positive in my reaction but it may not work very well for some participants in the market.”
He further adds, “The fact that the entire space of due diligence and being able to settle diligence claims and relations to disclosures should have been kept in the area where consent should have been possible because a lot of that is in a very subjective and qualitative area. But there is a footnote wherein the facts and circumstances are they still may settle default. So they have kept a window open in appropriate cases to settle it, it is not completely ruled out. So there can be times where it can be just trivial offenses or where there are no sort of misdoing on the part of all the intermediaries and where they can get it settled.