Given the apparent bullish trend in the capital markets in the past few months, price manipulators and insider dealers will not be far behind. And if the movements in some dubious scrips are any indication, they are already at play.
It would be unrealistic to assume that retail investors with burnt fingers will overcome their greed and not fall prey to these. The sudden spurt in press releases, rumours, filings and so on, followed by heavy trading in the scrips are standard symptoms of such activities.
Where does the legal set-up and enforcement to prevent, prohibit and punish such activities stand in this context?
Interestingly, while the markets were in a total slump in the last couple of years with practically no public issues, no buying, no selling and no other related activities, the Securities and Exchange Board of India (Sebi) was quietly strengthening the legal provisions. Several regulations and guidelines have been amended.
The Sebi Act itself has been amended with elaborate provisions and, as we will see, exemplary punishment has been provided. The fines have run into crores, often touching the amount of Rs 25 crore.
The changes were clearly warranted. Sebi has been criticised or been found helpless not only by investors and the press but also by judicial and appellate authorities.
Its attempts to provide even relatively mild punishment such as barring offenders from accessing capital markets have been overturned as being beyond its powers. Worse, its investigation and evidence gathering have also been found faulty.
It was found that even in relatively simpler cases, the evidence gathered was either incomplete or could not stand recognition in a court of law. It was often viewed as conjectures and speculation by legal and judicial bodies.
Consider the following remarks of the Securities Appellate Tribunal (SAT) in Sterlite
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