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SEBI disgorgement orders hit SAT wall

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sebi-kpsH--621x414@LiveMint

LiveMint featured an article discussing how disgorgement orders issued by SEBI continue to sputter at the appeals tribunal, exposing flaws in how the stock market regulator attempts to recover illegal gains.

In 2023 so far, the Securities Appellate Tribunal (SAT) has set aside disgorgement orders passed by SEBI in at least 3 major cases including the NSE India co-location case, NSE India Dark Fibre case and the Satyam matter.

Disgorgement is a remedial measure through which SEBI claws back illegal gains made by market participants through fraudulent means. However, there is no uniform procedure to calculate such gains. Courts have often held that the calculations made by SEBI have deviated from the principles of equitable approach leading them to be overturned.

In this background, the LiveMint article has featured the views of Mr. Sumit Agrawal, Managing Partner, Regstreet Law Advisors and former SEBI officer. Mr. Sumit Agrawal has observed that “SEBI has repeatedly deviated from the core disgorgement principle, which mandates quantifying ascertainable gains or avoided losses. Straying from this equitable approach, SEBI occasionally relies on total trade value, notional values, presumptions and even includes salary or bonus income. What was meant to be specific cases have turned routine. SEBI lacks a consistent disgorgement calculation method, granting officers discretion. Despite recommendations from committees, such as the Justice Wadhwa and the Justice Dave committees, for uniformity, this arbitrary approach persists.”

The LiveMint article also features the views of Mr. Anil Choudhary, Partner at Finsec Law Advisors. The complete article is enclosed herewith and is also accessible at https://lnkd.in/duX2WkPH Readers are welcome to share their views with Regstreet Law Advisors at info@regsla.com.

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