Sebi holds ‘fit and proper’ rule
Mumbai: The Securities and Exchange Board of India (Sebi), which set forth the ‘fit and proper’ person criteria for intermediaries, said in a statement before Bombay High Court on Thursday that it will not insist on compliance with notice until 2 August. A division bench led by Justices Gautam Patel and Neela Gokhale asked Sebi to file its affidavit in reply to the pleas filed by the proprietary concerns challenging schedule II of the Sebi (Intermediaries) Regulations, 2008.
Intermediaries including Motilal Oswal Financial Services, Anand Rathi Shares and Stock Brokers, Roongta Corporate Services, CD Equisearch, Systematix Shares and Stocks (India), LKP Wealth Advisory, LKP Securities, KR Choksey Shares and Securities, and Almondz Global Securities, besides others, had filed a clutch of petitions challenging constitutional validity of Clause 6 of Schedule II of 2008 regulation. Amendments notified in Schedule II under clause 3(b) (i) and (ii) state that principal officers, directors, managing partners, compliance officers and key managerial persons will attract disqualification from being ‘fit and proper’, the moment a chargesheet is filed by an enforcement agency in an economic offence against them.
In their petitions before the high court, the intermediaries said such provisions by Sebi are “manifestly unreasonable, arbitrary, unfair, forbiddingly excessive, extremely wide in scope and applicability and create an unreasonable restriction". The regulations seek to disqualify persons from participating in securities market on the basis of accusations.
The petitioners had anticipated Sebi would act against intermediaries if they did not comply with notice regarding declaring any individual ‘fit and proper’. “The impugned
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