Asia Press Agency

Tag: market regulator

  • SAT Quashes Sebi’s ₹65 Lakh Penalty on Apollo Tyres

    SAT Quashes Sebi’s ₹65 Lakh Penalty on Apollo Tyres

    The Securities Appellate Tribunal (SAT) has ruled in favor of Apollo Tyres by quashing the ₹65 lakh penalty imposed on the company by the Securities and Exchange Board of India (Sebi) for alleged violations of buyback norms dating back to 2003. SAT’s decision comes after Apollo Tyres filed an appeal against Sebi’s order, which imposed the penalty in November 2018.

     

    The allegations against Apollo Tyres revolved around the buyback of 36.90 lakh shares, which the company and its promoters were accused of conducting in violation of the relevant section of the Companies Act and Sebi regulations. Sebi argued that Apollo Tyres had not followed any of the prescribed methods for repurchasing shares as specified under the buyback regulation.

     

    Under Regulation 4(1) of buyback rules, a company can buy back shares through a tender offer, open market transactions conducted through the book-building process via stock exchanges, or from odd-lot holders.

     

    In its ruling, SAT cited the Supreme Court’s affirmation of the sale of 36.90 lakh shares, stating that once the sale had been upheld by the highest court, the question of Sebi investigating potential violations of Buy-Back Regulations or Section 77 of the Companies Act no longer applied. Therefore, the imposition of a penalty for alleged violations was deemed unwarranted.

     

    A bench of SAT, comprising Justice Tarun Agarwala and presiding officer Meera Swarup, stated, “The impugned order cannot be sustained and is quashed. The appeal is allowed with no order as to costs. We have been informed that the penalty amount has been deposited by the appellant under protest.” SAT directed Sebi to refund the penalty amount within four weeks from the date of the ruling.

     

    This decision marks the resolution of a long-standing legal dispute between Apollo Tyres and Sebi regarding the alleged buyback violations. The SAT’s ruling in favor of Apollo Tyres underscores the importance of legal due process and the need for regulatory authorities to demonstrate the clear violation of regulations before imposing penalties on companies.

  • Mutual Funds: SEBI Developing AI Tool to Detect Misselling

    Mutual Funds: SEBI Developing AI Tool to Detect Misselling

    The Securities Exchange Board of India (SEBI) is taking significant steps to address the issue of misselling by mutual funds by developing an artificial intelligence (AI) tool. SEBI Chairperson Madhabi Puri Buch highlighted the complexity of the problem and the need for more robust regulatory oversight to protect investors.

     

    One notable incident that underscored the urgency of addressing misselling involved a 90-year-old investor who was sold a product with a seven-year lock-in period. Such cases have raised concerns about the suitability of investment products for individual investors.

     

    To combat misselling effectively, SEBI is working on AI algorithms that can identify instances of misselling, even in intricate scenarios like the one involving the elderly investor. While mutual funds are currently required to provide compliance data to regulators periodically, Buch pointed out that rules-based supervision may not catch all instances of misselling. The introduction of AI-based analysis and monitoring tools is expected to enhance SEBI’s ability to detect and prevent misselling, ultimately safeguarding the interests of investors.

     

    In addition to addressing misselling, SEBI is exploring the concept of fractional ownership of shares. However, Buch noted that the existing legal framework does not permit such arrangements. To enable fractional ownership, changes would be required to both the SEBI Act and the Companies Act.

     

    SEBI’s efforts to leverage AI for monitoring mutual fund activities align with global trends in regulatory technology (RegTech). The financial industry is increasingly turning to AI-driven solutions to enhance compliance and investor protection. By embracing AI technology, SEBI aims to strengthen the oversight of mutual funds, improve transparency, and create a more secure investment environment for all stakeholders.

     

    As the development of the AI tool progresses, SEBI will likely play a pivotal role in shaping the future of mutual fund regulation in India. Investors can look forward to a more robust regulatory framework that is better equipped to detect and prevent misselling, promoting trust and confidence in the mutual fund industry.