Search the Internet          Tips  Sites: Finance, Investment

HC restrains Sebi from collecting fees from individual investors

The Delhi high court has restrained Securities and Exchange Board of India from recovering fees from registered investors on their personal transactions in stock market following a petition challenging the validity of a notification by the market regulator in this regard.

"No payment shall abide by respondent (Sebi)," a Bench comprising Chief Justice S B Sinha and Justice A K Sikri in its interim order said, while admitting for hearing a public interest litigation challenging the March 28 notification imposing fee on individual investors registered with the stock exchange.

Fixing the matter for final disposal on July 23, the court issued notices to the ministry of finance and Sebi directing them to file their replies by the next date.

The PIL filed by Yogesh Jain through his counsel M L Sharma challenged the Sebi notification on the ground that as per February 22 ruling of the high court, the fee could be imposed only on brokers not on any individual investor even if he was registered with a stock exchange.

"Personal transactions and those in the account of registered investors never come within the (definition) of brokers' account. Such transaction by any registered investor is always in his personal capacity and cannot be counted for broker turnover," the PIL quoting the high court ruling said.

Seeking to quash the notification on the ground that it was contrary to the provision of Sebi Act, 1992, as well as the provisions of the Constitution, Sharma said members registered with a stock exchange were not prohibited from making personal investment in the share market.

The PIL said since no definition of investor and broker has been given in the Sebi Act, "a member of stock exchange is free to act as investor if he is not acting as broker."

The court in its May nine order had permitted Jain to file a fresh writ petition challenging the "ultra vires" of the SEBI notification, saying the main thrust in his earlier PIL was to challenge the constitutional validity of the Sebi Regulation, 1992.

The Sebi notification said registration fees payable by the brokers to Sebi should be remitted in conformity with the amended regulations and taking into consideration the clarifications given in Part-A of its circular.

The brokers must remit fees to Sebi along with the auditors certificate. In case fees paid is less than the actual due amount, the broker "shall" pay the balance up to 50 per cent of the principal fees payable immediately and undertake to pay the remaining amount with interest within two years.

The petitioner said the cause of action in the case arose from the fact that Sebi, which was duty bound to provide all transaction facilities to investors in the country "has deprived millions of them to avail optional transaction in all terminals in the stock market."

"This is the worst example that Sebi, which is created for the benefit of investors is acting against their interest," the PIL said.

ALSO READ:
The SEBI Story
More Money Headlines