Be firm with those harming securities market's integrity, SC tells SEBI

New Delhi, April 27 (IANS) The Securities and Exchange Board of India (SEBI) would be failing in its duty to promote healthy growth of the markets and protect its integrity if it was not stern in dealing with companies and directors indulging in abuse of the market and insider trading, the Supreme Court has said.

A healthy and transparent securities market was a necessary prerequisite for the continued inflow of the foreign investment, the court said, adding that "disclosure and transparency are the two pillars on which market integrity rests".

"SEBI, the market regulator, has to deal sternly with companies and their directors indulging in manipulative and deceptive devices, insider trading etc. or else they will be failing in their duty to promote orderly and healthy growth of the securities market," Justice K.S.Radhakrishnan and Justice Dipak Misra said in their verdict Friday, upholding an order restraining N. Narayanan, promoter and full-time director of Pyramid Saimira Theatre Limited (PSTL), from directly or indirectly engaging in the share market.

The SEBI order was passed on April 18, 2011 and sustained Oct 5, 2012, by the Securities Appellate Tribunal.

Speaking for the bench, Justice Radhakrishnan said: "Economic offences, people of this country should know, is a serious crime which, if not properly dealt with, as it should be, will affect not only country's economic growth, but also slow the inflow of foreign investment by genuine investors and also casts a slur on India's securities market."

"Message should go that our country will not tolerate market abuse and that we are governed by the Rule of Law," the court said.

It said SEBI should ensure that "fraud, deceit, artificiality" have no place in the securities market.

Noting that people with power and money and in management of the companies "unfortunately often command more respect in our society than the subscribers and investors in their companies," the court said: "Companies are thriving with investors' contributions but they are a divided lot."

"SEBI has, therefore, a duty to protect investors, individual and collective, against opportunistic behavior of directors and insiders of the listed companies so as to safeguard market's integrity," the court said in its judgment.

The court also said that print and electronic media have also a solemn duty not to mislead the public, who are present and prospective investors, in their forecast on the securities market.

Holding that a genuine and honest opinion on market position of a company has to be welcomed, the court said: "But a media projection on company's position in the security market with a view to derive a benefit from a position in the securities would amount to market abuse, creating artificiality."

SEBI has the "duty and obligation to protect ordinary genuine investors" and is empowered to do so as to make security market a secure and safe place to carry on the business in securities, the court said.