Tribunal sets aside SEBI order on JM Mutual Fund

MUMBAI, NOV. 23. The Securities Appellate Tribunal (SAT) today pointed out the inconsistencies in the orders passed by the Securities and Exchange Board of India (SEBI) and asked the capital market regulator to be consistent in its orders in future to avoid the impression of discrimination. While setting aside an order of SEBI against JM Mutual Fund, Kumar Rajaratnam, Presiding Officer of the Tribunal stated, "Consistency is a hallmark of a good regulator. Pick and choose does not auger well for a healthy market.....We trust and hope that the regulator will be consistent in dealing with these matters in future otherwise it gives the impression of discrimination." The SEBI had imposed a penalty of Rs. 3000000 on JM Capital Management and a further sum of Rs. 2000000 on the JM Mutual Fund for their failure to comply with Section 15E (deals with failure to observe rules and regulations by the asset management company) and Sec. 15D (deals with defaults in case of mutual funds) of SEBI Act. This penalty of Rs. 5000000 was imposed on these entities as they failed to make mention of an earlier order of SEBI against JM Financial and Investment Consultancy Services Private Limited the sponsors of JM Capital Management for violating SEBI Takeover Regulations, in the offer document to launch its mutual fund schemes. "In circumstances where a person voluntarily comes forward and makes a disclosure stating that such disclosure was not made because of circumstances beyond his control, the SEBI should be little slow in issuing show cause notice without concrete proof that the entity deliberately withheld the information......In the result, we hold that the impugned order passed against the first appellant JM Mutual Fund is set aside. We, however, modify the order passed against the second appellant, JM Capital Management and reduce the penalty from Rs. 3000000 to Rs. 500000," the SAT ordered.