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SEBI asks Economic Laws Practice to return most of its briefs amid conflict of interest concerns

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The Securities and Exchange Board of India (SEBI) has sent an email to law firm Economic Laws Practice asking it to return the regulator’s briefs in cases it is involved in before various courts and tribunals.

This development comes after ELP recently represented Essel Group Chairman Subhash Chandra and Chief Executive Officer (CEO) of Zee Entertainment Enterprises Limited (ZEEL) Punit Goenka against SEBI before the Securities Appellate Tribunal (SAT).

Chandra and Goenka had challenged an interim order passed by the SEBI that barred them from holding directorial or key managerial positions in any listed company or its subsidiaries. The duo had hired ELP to represent them before the appellate body.

The SAT has now reserved for orders in the appeal and the order is awaited.

It is understood that the email sent to ELP to return SEBI’s briefs has come from the regulator’s Executive Director (Law) Babita Rayudu.

As per SEBI guidelines on the empanelment of advocates, there is a bar on advocates taking up matters against the organisation. Senior Advocates are exempted from this rule.

SEBI Rule

Commenting on this development, ELP Managing Partner Suhail Nathani told Economic Times, which first broke the story,

โ€œAs you may be aware, SEBI is serviced by a panel of law firms of its own choice. Just one aspect I would like to highlight – it is the client’s absolute prerogative to appoint a lawyer of its choice. Clients and lawyers are mutually free to set their own standards of engagement within the confines of professional rules.”

The regulatory practice of ELP has been representing SEBI for many years. The firm had also brought former SEBI Executive Director (Law) J Ranganakulu on board as an advisor. Reacting to the development, Managing Partner of Regstreet Law Advisors and former SEBI Officer Sumit Agrawal opined that imposing exclusivity on law firms may not bode well.

“If the reports of terminating or revoking a legal firm’s cases are accurate, it raises concerns about the independence and fairness of SEBI. Generally, legal professionals are expected to have the freedom to take on cases and represent their clients, irrespective of the nature of the case or the parties involved, as long as there is no conflict of interest in a specific matter. Conflict of interest is always context-dependent and not universal.

It would not be pragmatic for a reputable law firm to exclusively represent a regulatory body when there are over 6,500 listed companies, more than 10 lakh KMPs, intermediaries, and countless individuals associated with the securities market. Enforcing exclusivity could also limit access to top advocates. Regulators should consider implementing a conflict waiver process in such circumstances,” he said.

Another Mumbai-based securities lawyer, who wanted to stay anonymous, said, โ€œWith a client like SEBI, which is a regulator, one may have some constraints such as not taking up opposing parties. The empanellment agreement can contain a clause that law firms representing SEBI will not be allowed to represent parties against them. Lawyers and law firms who regularly appear against SEBI, the regulator is aware of their practice. So they (SEBI) may not empanel them also. It is smaller or mid-size law firms who can afford to take up that clause. And they get matters in huge volumes from SEBI.”

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