#Securities Law

The Supreme Court ruled that escrow release under Regulation 15B(8) of the Buyback Regulations does not preclude independent PFUTP fraud proceedings, as the inquiries operate in distinct fields. The Court remitted to SAT for fresh adjudication, directing resolution of trading data discrepancies and contradictory SEBI reports within six months.

The Supreme Court held that professional clearing members in the NSE’s futures-and-options segment have no statutory duty to verify individual client positions and that restitution orders beyond the powers granted by the SEBI Act are ultra vires. As a result, SEBI cannot impose blanket restitution on PCMs, leaving liability with the trading members and their clients.

SAT affirmed SEBI's two-year market debarment and penalties on Omaxe Ltd., its promoters and former CFOs for round-tripping and misstating accounts. The decision underscores that debarment is a proportionate sanction for corporate fraud, binding listed firms and key managerial personnel.

The SAT ruled that the conditions in sub-clauses (i)-(iii) of SEBI’s Regulation 27(1) bind not only the promoter’s direct entities but also borrowers, subsidiaries and associates linked to the promoter. This interpretation broadens the scope of prohibited rating assignments for credit rating agencies, exposing them to liability for ratings tied to any promoter-related borrowing.

The Securities Appellate Tribunal ruled that the 15-day period for a rival bid under SEBI’s Regulation 20(1) is triggered by the acquirer’s Detailed Public Statement and cannot be shortened by any exemption. This strict timing applies to all takeover contests, affecting bidders and target companies alike.

The Supreme Court reinstated SEBI's penalty on Tara Jewels promoters, ruling that merely possessing unpublished price-sensitive information and trading on it satisfies insider-trading liability, irrespective of any profit or the intended use of the proceeds. This establishes that motive or purpose of proceeds is irrelevant for penalty under the SEBI Act, affecting all present and future insider-trading cases.

The Supreme Court ruled that regulatory compliance under SEBI (Mutual Funds) Regulations, 1996 is non-negotiable, even if investors benefit from breaches. Penalties for Kotak Mahindra AMC and Trustee were upheld for lack of due diligence, unauthorized maturity extensions, and inadequate disclosures, reinforcing fiduciary duty over investor outcomes.

SAT Mumbai dismisses an appeal by a society lacking direct interest in SEBI's order, reaffirming that only 'aggrieved persons' under Section 15T of the SEBI Act can challenge regulatory decisions. This ruling clarifies locus standi requirements for appeals before SAT, impacting stakeholders seeking judicial review of SEBI orders.

The Securities Appellate Tribunal ruled that personal WhatsApp messages of a former employee cannot be used to impose liability on a registered investment adviser firm, emphasizing that penalties under the SEBI Act must be strictly proportionate to the adviser’s own conduct. This sets a critical precedent for digital evidence attribution and limits regulatory overreach in adviser misconduct cases.

The Securities Appellate Tribunal struck down a ₹5.69 crore penalty imposed on M. Prasad & Co. for reversal trades with its sister concern, ruling that penalizing both gross profit and gross loss sides without proving intent constitutes double punishment. This sets a critical precedent for brokers and NBFCs: penalties must be calculated on net gains, not aggregate transaction volumes, ensuring fairness under securities regulation.

The Securities Appellate Tribunal ruled that a director who has properly resigned cannot be penalized for post-resignation misconduct unless they retained de facto control or actively participated in the violations. This clarifies the boundary of accountability for former directors and protects compliant exiters from retrospective liability under SEBI’s enforcement regime.

The Securities Appellate Tribunal has ruled that SEBI cannot impose penalties without personally serving the show cause notice, invalidating reliance on email or postal alternatives when direct service is feasible. This sets a binding precedent for all SEBI adjudications, ensuring procedural fairness and protecting regulated entities from ex parte penalties based on defective notice.

The Securities Appellate Tribunal invalidated SEBI’s 2010 ex-parte penalty after a 13-year failure to serve the show-cause notice, ruling that prolonged inaction amounts to abuse of process and denies the accused a meaningful hearing. This sets a critical precedent for regulatory bodies: indefinite delays in service nullify enforcement actions, regardless of alleged misconduct, reinforcing that procedural fairness is non-negotiable in securities law.

The Supreme Court has ruled that under the PFUTP Regulations, mere position cornering or breach of trading limits does not amount to securities fraud unless there is evidence the manipulative activity induced investors to buy or sell. This sets a critical precedent for SEBI enforcement, requiring regulators to prove deceptive intent - not just market distortion - to establish fraud.

The Securities Appellate Tribunal ruled that unregistered investment advisors cannot retain fees collected from clients, regardless of whether investors seek refunds. The decision underscores SEBI's power to enforce full restitution, reinforcing investor protection and regulatory compliance in securities advisory services.