[ By Bobby Anthony ]The Securities & Appellate Tribunal (SAT) has quashed an order passed by the Securities & Exchange Board of India (SEBI) penalizing traders who had allegedly created artificial trading volumes in a specific scrip.The SAT has cited a seven-year delay in issuing show cause notices (SCNs) to alleged wrongdoers for violation of trading norms, as the reason to quash the...
The Securities & Appellate Tribunal (SAT) has quashed an order passed by the Securities & Exchange Board of India (SEBI) penalizing traders who had allegedly created artificial trading volumes in a specific scrip.
The SAT has cited a seven-year delay in issuing show cause notices (SCNs) to alleged wrongdoers for violation of trading norms, as the reason to quash the SEBI order.
Even though there is no period of limitation prescribed in the (SEBI) Act and Regulations in the issuance of an SCN or for completion of the adjudication proceedings, the authority is required to exercise its powers within a reasonable period as held recently
It may be noted that though there is no period of limitation prescribed in the SEBI Act & Regulations regarding the issuance of show cause notices or for completion of adjudication proceedings, the SEBI is required to exercise its powers within a reasonable period.
SAT found that the SEBI had issued show cause notices against alleged wrongdoers in 2017 for violation of Prevention of Fraudulent & Unfair Trade Practices (PFUTP) norms between January 2010 and January 2011 in a case related to alleged circular trading.
Yet, the SEBI defended its delay and told SAT that on the basis of investigations, a preliminary report was prepared on April 2, 2012, but no action could be taken in 2013-14 due to changes in the officers of the investigation department.
The SEBI stated that the investigation report was subsequently approved in February 2016, based on which a show cause could be issued only by July 24, 2017.
However, SAT stated that no urgency was shown by SEBI and hence it quashed the SEBI order.