SC Panel On Adani Case Suggests Regulatory Tweaks

In its reported dated 6 May, the committee opined that Sebi needed more judicial discipline when it comes to issuing orders. The committee observed sometimes Sebi officers adjudicate same issue differently leading to a divergence in views.

“Unless the ratio laid down by one adjudicating official has been upset or re-stated in appeal, it should be followed by others dealing with later cases," the expert panel said. “Likewise, once a ruling is set aside in appeal, unless the appellant order is stayed by the Hon’ble Supreme Court or writ petition, future adjudication by Sebi must abide by the law declared by the appellant authority,"

To handle complex cases that go beyond purview of a sectoral regulator, the committee suggested that the central government should explore the concept of ‘investigation committees’. Basically, these are like special task forces comprising of officials from multiple regulatory agencies. Once the specific case is concluded, the committee can be disbanded.

The report also talks about the need for Sebi to adhere to strict timelines for initiation and completion of investigations. In this regard, the committee observed Sebi should focus on cases of high importance. “The regulatory objective of Sebi may be better served by timely and sharp action in a few large and complex cases as compared to frittering energy and resources in thousands of tiny cases," the committee said “Every single case has consequence but for a regulator to achieve its objective, it has to be strategic on how best it can prosecute cases of serious significance,"

In this context, the committee suggest Sebi strengthen its settlement system where an entity accused of non-serious market violations can settle the same with Sebi without admitting or denying guilt. The entity would have to pay some fees towards such settlements.

The committee also added that within Sebi, the separation of power doctrine should be followed to the letter and spirit. The quasi-judicial arm of Sebi which passes orders needs to be ringfenced from the executive arm. “If the performance of the quasi-judiciary officers is appraised by the executive arm, the very foundation of separation of powers would stand nullified," the committee added.

It also suggested the creation of a single window for redressal of all investor-related complaints. Currently there are atleast four regulatory bodies which deal with such complaints including Sebi and Ministry of Corporate Affairs.