SEBI | Sahara India Financial Corp. Ltd., “not fit and proper person”; Sub-Broker Registration Cancelled

Securities and Exchange Board of India (SEBI): G. Mahalingam, (Whole Time Member) while accepting the recommendations of the Designated Authority (DA) held that the Noticee is “not a fit and proper person” in terms of Regulation 7(2)(e) read with Schedule II of the Intermediaries Regulations. The Order was passed under Regulation 27(5) of the  Intermediaries  Regulations,  which substituted  Regulation  28  of the aforesaid Regulations, with effect from January 21, 2021.

SEBI had appointed a DA to enquire, whether Sahara India Financial Corporation Limited violated provisions of Intermediaries Regulations. In the findings, the DA noted that considering the antecedents of Subrata Roy Sahara and the various judicial pronouncements against him and other  Group  Companies of  Sahara,  it is determined that the  Noticee is not a ‘fit and proper person’ to continue as a  sub-broker in the securities market. And that, Subrata Roy Sahara continues to be a substantial shareholder. Moreover, subsequent opportunities were given for a personal hearing, which were all adjourned at the noticee’s request. The last opportunity was granted on 2-12-2020, which was again requested for being adjourned. The Court took note of the fact that even after the resignation no change was found in the equity/preference holding.

The remarks made by the SAT in the matter of Jermyn Capital LLC vs. SEBI  (Order dated  September  6, 2006, was referred to, which says, “…The framers of the Regulations have consciously given such wide powers because of their concern to keep the market clean and free from undesirable elements.  It can take into account the financial integrity of the applicant and its competence.  Absence of convictions or civil liabilities would be another relevant consideration which could weigh with the Board.  Good reputation and character of the applicant is a very material consideration which must necessarily weigh in the mind of the Board in this regard.  Reputation is what others perceive of you.  In other words, it is the subjective opinion or impression of others about a person and that, according to the Regulations, has to be good…”

“…One bad element can, not only pollute the market but can play havoc with it which could be detrimental to the interests of the innocent investors…”

Therefore, it was held, that Subrata  Roy Sahara is a  Promoter and continues to hold substantial shareholding in the Noticee and therefore, is also capable of exercising control and influence over the management of the Noticee, thereby making it not a ‘fit and proper person’ in terms of Regulation 7(2)(e) read with Schedule II of the Intermediaries Regulations, to continue to act as a sub-broker.[Sahara India Financial Corporation Limited, In Re., 2021 SCC OnLine Sebi 20, decided on 03-03-2021]

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