Fines for a noble cause

INVESTOR AID

Penalties to form corpus of protection fund.

Sebi should get tougher in imposing stiff monetary penalties on the errant market players and pursue investor protection initiatives with greater rigour, thanks to the Budget proposal to ensure that the monetary penalty collected by the regulator can now go directly to investor protection initiatives.

The budget proposed that the fine and penalty collected by Sebi would go towards setting up an investor protection fund under the aegis of Sebi. "This will bolster confidence among retail investors who should be the key drivers of the capital market" the FM said.

Of late, the regulator has been talking loudly about protection measures in the form of support to investor associations etc. About couple of months ago, the regulator had approached the Department of Company Affairs to grant funds from the Investor Education and Protection Fund to fund grading of initial public offers.

Legal experts pointed out that the Securities Appellate Tribunal has more often slashed the monetary charges levied by the regulator on violators, even in case where the charges were proved and accepted. This stance constrains the regulator's revenues stream enormously.

Over the past one year, the regulator has increased its vigilance and passed over a hundred orders against erring market participants for various offenses ranging from price manipulation to inadequacies in disclosures etc. Though most Sebi orders have banned market participants from dealing in securities, there have been few instances of disgorgement of assets.

One of the reasons for this is that the current regulations allow taking away illegitimate gains only if it can been passed back to the rightful investors, which is a Herculean task for the regulators to figure out, experts said.