Sebi's consent order picks up

The Securities and Exchange Board of India’s (Sebi) consent order scheme and compounding of offences have picked up in a major way with about 1,000 applications in the pipeline awaiting settlement through the scheme.

According to official sources, the regulator has already cleared 350-400 applications and those cleared through consent orders have deposited around Rs 30 crore with the capital market regulator. The scheme, which was lying dormant since its introduction in April 2007, has gathered steam in recent months.

Earlier this month, Nissan Copper made the biggest payment of Rs 14 crore. After noticing an abnormal price rise in the company’s shares when it listed in December 2006, Sebi had passed an ex-parte order, directing stock exchanges to withhold the profits of the promoters — Rajeev Reniwal, Haryana Shipbreakers, Sanjeev Reniwal HUF, Shanti Swarup Reniwal HUF and Inducto Steel — in a separate escrow account.

The consent order is, however, only relevant to the proceedings related to Sebi and does not have statutory powers as in the case of a settlement commission of the income tax department or other such agencies. Experts said unlike Sebi’s consent orders, agencies like the settlement commissions are set up through a legislation and their orders give immunity to an entity from other laws and regulations.

The Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) have gone ahead and filed cases against those, whom Sebi has found guilty in market manipulations, and have also sought copies of the consent orders.

A case in point is persons or banks related to the IPO scam of 2005 that are in the process of facing prosecution from ED under the Prevention of Money Laundering Act and also being pursued by CBI.