SEBI has to ensure that no financial scams take place

Supreme Court: Looking into the matter reflecting the manner of getting excessive number of shares in an irregular manner, adversely affecting the small investors i.e. the Retail Individual Investors (RII), the Court held that Securities and Exchange Board of India Act, 1992 has been enacted to ensure that the Stock Exchanges of the country and the persons connected therewith do not indulge themselves into illegalities or irregularities and the functionaries under the Act have to see that no financial scams take place in the matters relating to issue or transfer of shares, management of Stock Exchange, etc.
In the present case, it was brought into the notice of SEBI that several serious irregularities/illegalities had been committed by some persons so as to corner shares of the said companies by adopting certain unscrupulous, immoral and improper methods not known to the law, which had not only affected the RII but had also an effect on the share market because such dealings by certain greedy persons would adversely affect the faith of a common man in the functioning of the share market. It was noticed that 553 demat account holders sold their shares through a broker or otherwise at a price below the market value. Considering that no man of prudence would enter into such transaction, the Whole Time Member of SEBI, upon investigation, came to the conclusion the demat accounts were signed by same persons with different spellings of their names and in different manners. It was also noticed that Number of demat account were having same address and that too, care of someone else and this makes genuineness of the account holders and the transactions doubtful.
The bench of A.R. Dave and R.Banumathi, JJ also rejected the contention that no Retail Individual Investor had made any complaint to the SEBI and held that the SEBI need not act only on the basis of a complaint received. If from its independent sources, the SEBI, after due enquiry comes to know about some illegality or irregularity, the SEBI has to act in the manner as it acted in the instant case. It was held that the entire case was decided by the Whole Time Member of the SEBI after keeping in mind the object of the Act. [SEBI v. Opee Stock-Link Ltd, 2016 SCC OnLine SC 687, decided on 11.07.2016]

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