Brokers take issue with Sebi's basis for 'fit & proper person'
Motilal Oswal Financial Services (MOFSL) and Anand Rathi Shares and Stock Brokers, have challenged the constitutional validity of the Securities & Exchange Board of India's (Sebi) 2021 amendments detailing the 'fit and proper person' criteria for intermediaries in the Bombay High Court. The division bench of Justice GS Patel and Justice Dr Neela Gokhale has directed the capital markets regulator to file its response by July 20 in the matter, and has adjourned the case to August 2 for further hearing.
The most contentious parts of the amendments to the original regulations say that a person must be removed as a director or a key manager within 15 days if there is a chargesheet filed against the person for alleged breach of any legal provision. Senior counsel Janak Dwarkadas, appearing for Motilal Oswal, argued that these regulations made by Sebi seek to disqualify a person from participating in the securities market based on accusations and allegations without taking into consideration the nature of an offence.
The regulations also don't explain whether the allegations have any consequences on their participation in the securities markets, he argued. «If there is a chargesheet filed, even while the charges are not proven, it may lead to disqualification of a person from the intermediary within 15 days,» argued Dwarkadas.
«If the intermediary fails to comply with that, even that entity would be in violation and may not be termed as 'fit and proper', which is a violation of fundamental rights.» Motilal Oswal further argued that the amendment is not treating all the operating agencies on a par, and the rule doesn't apply to stock exchanges and clearing agencies, but only intermediaries (brokerage houses). The other
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