• Market regulator Securities and Exchange Board of India (SEBI) has barred industrialist Anil Ambani and 24 others from the securities market for five years on charges of diversion of funds from Reliance Home Finance Ltd.

• Additionally, SEBI has imposed a penalty of Rs 25 crore on Ambani and restrained him from serving as a director or Key Managerial Personnel (KMP) in any listed company or Sebi-registered entity for five years.

• Besides, a fine ranging Rs 21 crore to Rs 25 crore have been levied on 24 entities. Also, the regulator barred Reliance Home Finance from the securities market for six months and slapped a fine of Rs 6 lakh on it.

• After receiving multiple complaints alleging diversion/siphoning of funds of Reliance Home Finance Ltd, SEBI  conducted an investigation for the period of FY 2018-19 to ascertain any regulatory violations.

• In its probe, SEBI found that Anil Ambani, with the help of RHFL’s KMPs — Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah — orchestrated a fraudulent scheme to “siphon off” funds from RHFL by disguising them as loans to entities linked to him.

• Although the board of directors of RHFL had issued strong directives to stop such lending practices and review corporate loans regularly, the company’s management ignored these orders.

• This suggests a significant failure of governance, driven by certain KMPs under the influence of Ambani, SEBI noted.

What is the role of SEBI?

• The Securities and Exchange Board of India (SEBI) was constituted as a non-statutory body on April 12, 1988 through a resolution of the government of India for dealing with all matters relating to the development and regulation of the securities market and investor protection and to advise the government on all these matters.

• SEBI was given statutory status and powers through an Ordinance promulgated on January 30, 1992. SEBI was established as a statutory body on February 21, 1992. The Ordinance was replaced by an Act of Parliament in April 1992.

• The Board has the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit.

The main objectives of SEBI are:

i) To protect the interest of the investors.

ii) To regulate and promote development of securities markets in India. 

The main functions of SEBI include:

i) Registration, regulation and supervision of intermediaries operating in the securities market.

ii) Promoting and regulating self-regulatory organisations.

iii) Prohibiting fraudulent and unfair trade practices relating to securities markets.

iv) Calling from or furnishing to other authorities, whether in India or abroad, such information as may be necessary for the efficient discharge of its functions. The Board, for  the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the central government.

Members of the Board

The Board consists of:

i) Chairperson

ii) Two members from the officials of the finance ministry.

iii) One member from the officials of the Reserve Bank of India.

iv) Five other members of whom at least three shall be whole-time members, to be appointed by the central government.

• The general superintendence, direction and management of the affairs of the Board shall vest in the Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the Board.

• A Financial Sector Regulatory Appointment Search Committee (FSRASC) has been created by the government for recommending names of suitable persons for appointment to board level positions of financial sector regulatory bodies.

• The candidates are shortlisted by the FSRASC headed by Cabinet Secretary.

• The shortlisted candidates are interviewed by the panel comprising Economic Affairs Secretary and three external members having domain knowledge. Besides, the high level panel has authority to recommend names other than those who have applied for the advertised post.

• Based on interactions, FSRASC recommends names to the Appointments Committee of Cabinet headed by the Prime Minister.

Securities Appellate Tribunal

• Securities Appellate Tribunal is a statutory body established under the provisions of the Securities and Exchange Board of India Act, 1992 to hear and dispose of appeals against orders passed by SEBI or by an adjudicating officer under the Act.

• SAT hears and disposes of appeals against orders passed by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013.

• SAT also hears and disposes of appeals against orders passed by the Insurance Regulatory Development Authority of India (IRDAI) under the Insurance Act, 1938, the General Insurance Business (Nationalisation) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 and the Rules and Regulations framed thereunder.

• The SAT consists of a presiding officer and two other members to be appointed by the central government.

• The presiding officer shall be a sitting or retired judge of the Supreme Court or High Court.

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