New Delhi: The capital markets regulator Securities and Exchange Board of India (SEBI) told the Supreme Court today that its 2019 rule changes do not make it tougher to identify beneficiaries of offshore funds, and action will be taken if any violation is found. SEBI said it has continuously tightened rules concerning beneficial ownership and related-party transactions.
A Supreme Court-appointed expert committee had in an interim report in May said it saw ‘no evident pattern of manipulation’ in billionaire Gautam Adani’s companies and there was no regulatory failure. It, however, cited several amendments the SEBI made between 2014 and 2019 that constrained regulators’ ability to investigate, and its probe into alleged violation in money flows from offshore entities has ‘drawn a blank’.
Without making any mention of the status report of its own investigation, SEBI in its latest affidavit to the Supreme Court said it did not agree with the expert committee observation of difficulties in identifying holders of economic interest behind an offshore fund. It also differed with the panel observation that stocks will re-price if the markets feel actions taken in the past by the company were not desirable, saying even if the market may re-price the stocks of the company based on the past transactions, ‘there is no bar on SEBI to examine any securities laws violations because re-pricing of the stock has happened’.
SEBI indicated it does not agree with the expert committee’s views and action will be taken if any violation is found/established. The committee was to work in parallel with the probe by Sebi into offshore entities investing in the Adani Group. The regulator was first asked to complete the probe in two months and then given another three months till August 14.
In the affidavit, SEBI said its 2019 rule changes in fact ‘tightened the disclosure requirement’ related to beneficial owners. In its 43-page filing, SEBI opposed the expert committee’s recommendation that a firm timeline for the regulator to complete its investigation must be ‘embedded into the law’, saying prescribing such limits ‘may compromise the quality of investigation’, create constraints and increase litigation.
A bench headed by Chief Justice DY Chandrachud is scheduled to hear the case tomorrow. In the affidavit, SEBI has given its views on the recommendations by the expert committee on issues like effective enforcement policy, judicial discipline, robust settlement policy, necessary timelines, surveillance and market administration measures, creation of financial redress agency and others.
‘Prescribing timelines for initiation of investigation and proceedings may not be appropriate as the Board is mandated to form a prima-facie opinion (reasonable grounds) to appoint an investigating authority’, it said. ‘Further, the nature, scope and complexity of cases in the securities market vary significantly, and ‘reasonable time’ to complete investigation would depend on the facts of each specific case and availability of information. Therefore, prescribing specific timelines to complete the investigation may compromise the quality of the investigation’, the SEBI said.
Post Your Comments