Sebi seeks to ease pain of rising legal fees

Asks ministry if penalties could be remitted to Consolidated Fund of India after necessary deductions

The Securities and Exchange Board of India (Sebi). in a bid to rationalise its expenses, has asked the Union finance ministry if it could deduct legal fees from penalties before remitting the amounts to the government.

The number of cases in 2013-14 in which the regulator was made a party rose nearly 60 per cent over the previous year, to 225 as against 142 earlier. The number of cases pending in various courts where Sebi was made a party, as of March 2014, was 830, according to its annual report. Sources say Sebi has suggested the penalties collected from companies and brokers in instances of market malpractice could be used to meet the legal costs incurred in prosecution of such cases.

“Net proceeds by way of penalties should be remitted to the Consolidated Fund of India after deducting the legal expenses incurred by the markets regulator,” said a source.

It appears the legal expenses incurred during 2013-14 exceeded Rs 6 crore, nearly a fifth higher than those in 2012-13. During the year, Sebi had to fight a number of high-profile cases, including the much-reported one with the Sahara group. Reliance Industries had taken the regulator to the Securities Appellant Tribunal in the matter of Reliance Petroinvestments, where the regulator had passed an order on charges of insider trading.

This February, the markets regulator had filed an interlocutory application in the Supreme Court, seeking relief from the expenses it has or will incur in the matter of the Sahara companies. Sebi had also requested the apex court to allow it to use a portion of the Rs 5,120 crore refunded by Sahara to settle the expenses it had incurred while carrying out the directions of the court in the order of end-August 2012.

“The Sahara (companies) had sent 127 trucks stated to contain about three crore application forms and 2.2 crore redemption vouchers/statutory forms in December 2012, which were found to be incomplete and hopelessly mixed up,” stated Sebi’s annual report.

To manage the documents and for refunds, it had awarded a contract to Stock Holding Corporation of India (SHCIL) for storage and digitisation worth Rs 25.96 crore and UTI Infrastructure & Technology Services for an annual contract of Rs 29.87 crore. The storage cost payable to SHCIL is likely to go up.

An email sent to a spokesperson did not immediately receive a reply.