How to Appeal Against SEBI Orders: A Guide for Intermediaries

How to Appeal Against SEBI Orders: A Guide for Intermediaries

What are SEBI Orders and Why Do They Matter?

The Securities and Exchange Board of India (SEBI) is the regulator of the securities market in India. It has the power to issue orders against intermediaries who violate the provisions of the SEBI Act or the regulations made thereunder. Intermediaries are entities or persons who perform various functions or services in relation to securities, such as brokers, sub-brokers, merchant bankers, underwriters, portfolio managers, investment advisers, depositories, custodians, etc.

SEBI orders can have serious consequences for intermediaries, such as suspension or cancellation of registration, debarment from accessing the securities market, imposition of monetary penalty, etc. Therefore, it is important for intermediaries to know how to appeal against SEBI orders and protect their rights and interests.

What are the Types of SEBI Orders and How Are They Passed?

SEBI orders can be broadly classified into two types: quasi-judicial orders and administrative orders. Quasi-judicial orders are passed by SEBI or its adjudicating officers after following a due process of law, such as issuing show cause notices, conducting inquiry or adjudication proceedings, giving opportunity of hearing, etc. Administrative orders are passed by SEBI or its designated authorities without following a formal procedure, such as issuing directions, circulars, guidelines, etc.

Quasi-judicial orders are passed under various provisions of the SEBI Act or the regulations made thereunder. For example, SEBI can pass an order under Section 11B of the SEBI Act for issuing directions to any intermediary or any person associated with the securities market in the interest of investors or securities market or for the due compliance with the provisions of the Act or rules or regulations made thereunder. Similarly, an adjudicating officer can pass an order under Section 15-I of the SEBI Act for imposing penalty on any intermediary or any person associated with the securities market for contravention of any provision of the Act or rules or regulations made thereunder.

Administrative orders are passed under various powers conferred by the SEBI Act or the regulations made thereunder. For example, SEBI can pass an order under Regulation 11 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 for initiating investigation into any matter relating to insider trading. Similarly, a designated authority can pass an order under Regulation 25 of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 for initiating disciplinary proceedings against any intermediary for non-compliance or misconduct.

How to Appeal Against Quasi-Judicial Orders?

If an intermediary is aggrieved by a quasi-judicial order passed by SEBI or its adjudicating officer, it can appeal to the Securities Appellate Tribunal (SAT) under Section 15T of the SEBI Act. The SAT is a statutory body that hears appeals against the orders of SEBI or its adjudicating officers. Here are some steps to file an appeal before the SAT:

  • The appeal has to be filed within 45 days from the date of receipt of the order. However, the SAT may condone the delay if it is satisfied with the reasons for the delay.
  • The appeal has to be filed in Form A as prescribed in the Securities Appellate Tribunal (Procedure) Rules, 2000. A copy of the order appealed against has to be attached along with other relevant documents and evidence.
  • A fee of Rs. 1,500 has to be paid for filing the appeal. The fee can be paid by demand draft or postal order in favor of the Registrar, Securities Appellate Tribunal, payable at Mumbai.
  • A copy of the appeal along with all the annexures has to be served to SEBI or the adjudicating officer who passed the order. A proof of such service has to be filed with the SAT.
  • The case has to be presented before the SAT either in person or through an authorized representative. A request for a personal hearing can also be made before the SAT.
  • The SAT will hear the appeal and pass an order either confirming, modifying, or setting aside the order appealed against. The SAT may also remand the matter back to SEBI or the adjudicating officer for fresh consideration.

How to Appeal Against Administrative Orders?

If an intermediary is aggrieved by an administrative order passed by SEBI or its designated authority, it can file a representation before SEBI under Regulation 29A of Chapter VIA (Procedure for Action in Case of Default) of Part II (General Obligations) of Schedule I (General Regulations) to Securities Contracts (Regulation) Rules 1957 (“SCRR”). Here are some steps to file a representation before SEBI:

  • The representation has to be filed within 21 days from the date on which the order is served on the intermediary. However, SEBI may extend the time limit for filing the representation on sufficient cause being shown by the intermediary.
  • The representation has to be filed in writing along with supporting documents and evidence. The representation has to state the grounds on which the order is challenged and the relief sought from SEBI.
  • The representation has to be addressed to the Chairman of SEBI and sent to the concerned division of SEBI that passed the order.
  • SEBI will consider the representation and pass an order either confirming, modifying, or setting aside the order challenged by the intermediary. SEBI may also give an opportunity of hearing to the intermediary before passing the order.

What are the Other Remedies Available?

If an intermediary is not satisfied with the order passed by SAT or SEBI on its appeal or representation, it can further challenge the order before the Supreme Court of India under Article 136 of the Constitution of India. The Supreme Court has the power to grant special leave to appeal against any order passed by any court or tribunal in India. However, this power is discretionary and exceptional and is exercised only in cases involving substantial questions of law or public interest.

Alternatively, an intermediary can also file a writ petition before the High Court under Article 226 of the Constitution of India. The High Court has the power to issue writs for the enforcement of any fundamental right or any other legal right. However, this power is also discretionary and extraordinary and is exercised only in cases involving violation of natural justice, jurisdictional error, or manifest illegality.

Conclusion about SEBI orders

SEBI orders are important for ensuring compliance and discipline in the securities market. However, they can also affect the rights and interests of intermediaries who are subject to them. Therefore, intermediaries should be aware of how to appeal against SEBI orders and avail the remedies available to them. This article provides a brief overview of the types of SEBI orders, the procedure for appealing against them, and the other options for challenging them. However, this article is not intended to be a substitute for legal advice and intermediaries should consult a qualified lawyer before taking any action.