Home Case Index All Cases SEBI SEBI + AT SEBI - 2022 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (5) TMI 761 - AT - SEBIFraudulent and Unfair Trade Practices relating to Securities Market - Transaction violative of Regulation 3 and 4 of the PFUTP Regulations - HELD THAT - Specified proceedings has been defined under Section 2(f) of the Settlement Regulations, 2018, namely, the proceedings that have been initiated by SEBI under the SEBI Act, Securities Contracts (Regulation) Act, 1956 or Depositories Act, 1996 as the case may be. 14,000 odd cases have been initiated under the illiquid stock option matters wherein similar kind of transaction have been executed and similar violation is proposed against all these noticees under Regulation 3 and 4 of the PFUTP Regulations. These 14,000 entities form a class of persons and are involved for similar defaults. Therefore, in our opinion, the Board can specify a procedure and terms of settlement for these classes of persons under Clause 26 of the Settlement Regulations, 2018. SEBI should reconsider and seriously give a thought in coming out with a fresh scheme under Clause 26 of the Settlement Regulations, 2018. Such scheme can be a onetime scheme for this class of person. The terms of settlement should be attractive so that it could attract the noticees / entities to come forward and settle the matter which will ameliorate the harassment of penalty proceedings to the noticees and at the same time would help to clear the backlog of these pending matters before various AOs. While considering the scheme SEBI should take into consideration the provision of Section 15HA of SEBI Act prior to the amendment made by Act No. 27 of 2014 with effect from September 8, 2014. We find that various AOs have imposed a sum of Rs. 1 lakh for similar trades which were executed prior to September 8, 2014 and Rs. 5 lakh have been imposed for similar trades after the amendment of September 8, 2014. SEBI should also take into consideration that only a few trades were executed for small gains and some of the AOs have exonerated these noticees on the ground that such miniscule trades did not create any impact. We also request SEBI that while framing a scheme under the Settlement Regulations, 2018 it may also take into consideration the reduction of the quantum of penalty imposed in matters decided so far. We direct the Registrar of this Tribunal to send a certified copy of this order to the Chairperson of SEBI within a week for necessary information and action.
Issues:
- Appeals against penalty orders under SEBI Act for violation of PFUTP Regulations - Applicability of Section 15HA of SEBI Act - Controversy regarding reversal trades and penalty imposition - Manipulative transactions and violation of PFUTP Regulations - Overload of penalty proceedings and pendency before AOs - Ineffectiveness of previous settlement scheme - Anomalous penalty imposition under Section 15HA - Settlement mechanism under Section 15JB of SEBI Act - Need for a new settlement scheme under Settlement Regulations, 2018 Analysis: 1. The appeals were filed against penalty orders imposed by SEBI for violations of PFUTP Regulations. The controversy revolved around the applicability of Section 15HA of the SEBI Act and the nature of reversal trades executed by the appellants. Despite attempts to distinguish previous decisions, the Tribunal found the transactions manipulative and violative of regulations, leading to dismissal of all appeals. 2. The Tribunal noted the overload of penalty proceedings before AOs, with thousands of entities facing similar charges. Previous settlement schemes were deemed ineffective due to stringent terms and the timing of their introduction during the pandemic peak, resulting in low participation. 3. Anomalous penalty imposition under Section 15HA was highlighted, with varying penalties for similar violations based on the timing of transactions. The Tribunal suggested the need for a new settlement scheme to address the backlog of cases and reduce the burden on AOs. 4. The settlement mechanism under Section 15JB of the SEBI Act was discussed, emphasizing the need for a more attractive and viable scheme to encourage entities to settle. The Tribunal recommended SEBI to reconsider and introduce a fresh scheme under Clause 26 of the Settlement Regulations, 2018 for the class of persons involved in similar defaults. 5. SEBI was urged to consider reducing the quantum of penalties imposed in previous cases and to take into account the circumstances of small trades that had minimal impact. The Tribunal directed the Registrar to send a copy of the order to the SEBI Chairperson for necessary action. 6. Overall, the judgment highlighted the need for a comprehensive and practical settlement scheme to address the backlog of cases, streamline penalty proceedings, and provide a fair and efficient resolution mechanism for entities facing similar charges under the SEBI Act.
|