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An interim SEBI order must not be open-ended

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After writing on issues of ‘orders prohibiting persons from associating with the securities market’ (link to the article: https://lnkd.in/dm_K3cWq ) and ‘issuance of warning’ by SEBI is case of any of its provisions, directions or orders (link to the article: https://lnkd.in/dSbXBFh3), Dr. M. S. Sahoo a distinguished professor at National Law University, Delhi [former Chairperson Insolvency & Bankruptcy Board of India (IBBI) and Board member of

Competition Commission Of India as well as SEBI] along with Mr. Sumit Agrawal, founding partner, Regstreet Law Advisors [former SEBI Officer and visiting faculty Government Law College, Mumbai and National Institute of Securities Markets (NISM)] have authored a recent article in The Business Standard today on menace of interim orders titled, ‘Interim doesn’t mean open-ended’.

In the piece they argue that while SEBI issues interim orders in the interest of investors in securities or the securities markets, pending investigation or inquiry, there is a need to use this power judiciously and extraordinary discipline is required to be followed to use this extraordinary power.

SEBI issues interim order in exercise of its power under Section 11(4) of the SEBI Act, 1992. However, the section does not provide a timeline within which the final order needs to be issued. This has led to instances where the interim order has remained in force for decades merely on grounds of suspicion. Further, waiting for the conclusion of the proceeding is more painful than the worst penalty the contravention may warrant.

Moreover, interim orders not only punish the parties against whom order is issued but also third parties. Investors are deprived of liquidity and companies are deprived of leadership. Additionally, the interim order operates on the principle of guilty until proven innocent causing irreversible and irreparable damage to the reputation and livelihood of a person even if the person is declared innocent subsequently.

They, thus, suggest that there is a need to impose conditions such as time limit and reasons to be recorded in writing based on evidence for issuance of interim orders.

One may access and read the full Business Standard article at https://lnkd.in/dqsMfbTJ

Securities law enthusiasts can read the article from the link given below. Also you could provide comments or feedback to Regstreet Law Advisors at info@regsla.com

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