SEBI’s Consent Order in the Reliance ADAG Case

From the regulator’s perspective, the consent order provides a timely outcome to a matter where investigation is likely to have prolonged for an extended period of time and where the regulator may not necessarily foresee high chances of success. In this regard, offences in the secondary markets such as insider trading and market manipulation are indeed onerous to establish. However, the downside of such a settlement is an inherent lack of transparency because it eliminates the opportunity to the regulator to delve into the detailed appreciation of the facts and circumstances of the case. In this case too, SEBI’s order is devoid of any detailed discussion of the allegations or the manner in which it arrived at the terms of the order. In that sense, it is impossible to say with precision whether the measure of sanctions imposed in a consent or settlement order is commensurate with the violations involved. In some jurisdictions, this difficulty is dealt with by having a court of law examining the terms of settlement independently to determine its fairness in the circumstances, and courts have on occasion rejected terms of settlements by regulators. However, in the context of consent orders of SEBI, there is no such automatic independent determination, unless the order is separately challenged.