Introduction
In the world of capital markets, where fortunes are made and lost in a matter of seconds, legal compliance isn’t just a requirement, it’s a foundation of trust and stability. At Khanna & Associates, we specialize in securities law, providing expert advice to companies, investors, and intermediaries. We help our clients navigate the intricate web of regulations governed by the Securities and Exchange Board of India (SEBI), ensuring they can operate confidently and compliantly in the market.
Understanding the SEBI Framework
SEBI is the vigilant guardian of India’s capital markets. Established under the SEBI Act, 1992, its core mandate is to protect investors, promote market development, and regulate the securities market. Its regulations cover everything from initial public offerings (IPOs) and insider trading to corporate governance and fraudulent and unfair trade practices.
Our expertise at Khanna & Associates spans this entire regulatory spectrum. We assist clients with the complex legal aspects of public offerings, ensuring every disclosure and filing is meticulously prepared to meet SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations. We also provide ongoing legal counsel on corporate governance, helping companies adhere to the Listing Obligations and Disclosure Requirements (LODR) Regulations.
The Sahara vs. SEBI Precedent
To illustrate the far-reaching powers of SEBI, we turn to one of the most significant legal battles in Indian corporate history: the Sahara India Real Estate Corp. Ltd. vs. SEBI case. This landmark judgment, which went all the way to the Supreme Court, affirmed SEBI’s jurisdiction over public offerings, even those made by unlisted companies.
The case involved two Sahara companies that had raised over ₹24,000 crore from millions of investors through a type of security called Optionally Fully Convertible Debentures (OFCDs). Sahara contended that since the issue was a “private placement” and the companies were unlisted, SEBI had no jurisdiction.
The Supreme Court, however, ruled that because the OFCDs were offered to more than 50 people, they constituted a public issue and were, therefore, subject to SEBI’s regulatory framework. The court ordered Sahara to refund the entire amount with interest to the investors, underscoring SEBI’s authority and its crucial role in protecting the interests of the public. This case set a powerful precedent, reinforcing the principle that companies cannot bypass investor protection laws by structuring financial products to avoid regulatory scrutiny.
Navigating Enforcement and Compliance
Non-compliance with SEBI regulations can lead to severe penalties, including hefty fines, disgorgement of illegal gains, and debarment from the securities market. Our team provides comprehensive compliance services, conducting legal due diligence and internal audits to identify and rectify potential violations before they escalate into enforcement actions. We also represent clients in proceedings before SEBI, the Securities Appellate Tribunal (SAT), and the Supreme Court.
FAQs
Q1: What is SEBI and what are its main functions?
The Securities and Exchange Board of India (SEBI) is the statutory regulator for the securities market in India. Its main functions are to protect the interests of investors, promote the development of the market, and regulate the activities of market intermediaries.
Q2: What is insider trading, and how does SEBI regulate it?
Insider trading involves trading in securities based on Unpublished Price Sensitive Information (UPSI). SEBI’s Prohibition of Insider Trading (PIT) Regulations strictly prohibit such activities. Companies must implement robust internal codes of conduct and a robust system to prevent and monitor insider trading.
Q3: Why is SEBI compliance important for a company?
SEBI compliance is essential for a company’s integrity and long-term sustainability. It builds investor confidence, ensures market transparency, and protects the company from legal penalties, reputational damage, and financial losses associated with regulatory violations.
Conclusion
In today’s dynamic and complex financial markets, a deep understanding of securities law is indispensable. At Khanna & Associates, we pride ourselves on being more than just legal advisors, we are strategic partners in your success. From ensuring a smooth IPO process to defending against regulatory actions, we provide the expert legal counsel you need to thrive in the world of securities.