With a booming stock market, trading interest picks up, and so does stock price manipulation and insider trading.
SEBI has attempted to free up its scant manpower to address these serious offences, in its recent board meeting.
SEBI has ruled that the procedure for settlement of minor offences will be greatly simplified. Earlier a settlement could start only after the issue of a formal show cause notice. This resulted in unnecessary delay.
The regulator has now decided that an intimation will first be sent out in cases of minor violations. The parties concerned can then seek settlement through a consent order or in any other manner. This move will have two major impacts. It will free up the limited manpower at the disposal of SEBI to conduct investigations into more serious offences. The regulator is already getting flak for inordinate delays in closing investigations. In the recent order against the promoters and directors of DLF for IPO-related irregularities, the regulator had taken around seven years to give the final order. Such delays tend to dilute the impact of the punishment on the offenders.
The other impact will be that speedier investigations and orders in serious market-related irregularities will deter offenders and help clean up the stock market. As the accompanying table shows the number of cases opened by SEBI for investigation have more than doubled from 68 cases in 2000-01 to 158 in 2012-13.
With the ongoing interest in small-cap stocks and return of trading interest, the number of cases that SEBI has to handle is also likely to rise.
Of the cases taken up for investigation by SEBI, almost half are related to manipulation of stock prices around public issue of shares. The next higher offence that is reported to SEBI has to do with market manipulation and price rigging.