It is settled law – in fact dozens of SAT and high court rulings have held that under the ‘direction’ making power of S. 11 and 11B, SEBI cannot impose penalty. The order under S. 11B curiously orders that the amount (which appears similar to disgorgement) be handed over to the consolidated fund of India – thereby implicitly admitting that the amount is a penalty – and thus ensuring that the order will be set aside by SAT and the violator will go home free. In addition, it takes money belonging to victims of securities crime and gives it to the government – a doubly unfair outcome. Seems SEBI just inflicted a self goal in an otherwise strong case.
Note: See SEBI Board meeting agenda which shows that disgorgement amounts are not given to the Consolidated Fund of India.
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