Market regulator SEBI has reconstituted the High Powered Advisory Committee (HPAC) on consent orders and compounding of offences.

According to market sources, former justice of the Mumbai High Court, Mr S.M. Jhunjhunwala, would head the team as Chairman. Mr Prabhudas Liladher (former RBI Deputy Governor) and an associate of E&Y have been appointed as new members.

According to sources, they would replace the current Chairman, Mr Justice Hosbet Suresh, former judge of High Court of Bombay, and members - Mr M. Balachandran, ex-Chairman and Managing Director, Bank of India, Mr Ketan Dalal, Executive Director, Pricewaterhouse Coopers.

However, Dr B. Samal, former Member of Securities Appellate Tribunal, will continue as a member in the new team.

It may be recalled that recently, the Delhi High Court issued a notice to SEBI on a public interest litigation filed by Mr Deepak Khosla on the powers of SEBI to decrease or waive mandatory penalty using the consent order route.

The PIL states that SEBI does not have any power to issue such a circular under the SEBI Act. The circular violated several sections (Sections 11, 15 A to 15 H,15 I,15 T and 24 A) on the mandatory obligation of SEBI to impose a penalty for violation and SEBI has no discretion, said the PIL.

The circular defeated the scheme of deterrence set out in the SEBI Act because there is no mention that a consent order can be revoked for a repeat violation, the PIL said.

It also said that consent was allowed in cases where SEBI had concluded that there was a prima facie case of violation.

The consent order mechanism was introduced by SEBI through a circular dated April 20, 2007. This entails disposal of cases without admission or denial of guilt subject to conditions (proposed by the accused party) being accepted by the high powered advisory committee appointed by SEBI.

According to media reports, Reliance Industries has been negotiating with the regulator for a possible consent order in a case relating to alleged insider trading.

After Mr U.K. Sinha took over as Chairman, SEBI has embarked on a restructuring drive for the various advisory panels that help it frame new regulations in different capital market segments, such as IPOs, mutual funds and secondary market trading. According to SEBI sources, the changes were mainly for bringing in a more diversified representation from various segments.

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