Abatement Order by SEBI

An abatement order by the Securities and Exchange Board of India (SEBI) is referred to as a directive issued to reduce certain penalties or actions against an individual or business involved in violation or non-compliance with the securities market. As part of its regulatory framework, SEBI has the power to issue abatement orders in order to address a variety of securities market-related issues. If entities follow the guidelines or make the necessary corrections, these orders may involve lowering the severity of penalties, fines, or limits imposed on them for specific offences. It is necessary to understand that the specifics of an abatement order, which includes terms, conditions, and the circumstances surrounding the issuance of such order, vary from case to case basis.

Why is the Order Named an Abatement Order?

An ‘abatement order’ typically refers to a legal directive issued by a government agency or court to prevent or rectify a particular nuisance, violation, or issue. The term ‘abatement’ implies the reduction or elimination of something undesirable or harmful. In legal contexts, this type of order is often used in environmental, health, or safety matters. For instance, it could be issued to address noise pollution, an environmental hazard, or a building code violation. The term ‘abatement’ also signifies the action taken to lessen or eliminate the problem specified in the order. ²

An abatement order is issued by SEBI to prevent a mishappening in the market thereby maintaining the regulating activity vested upon SEBI as the market regulator. Thus, the order is meant to prevent any kind of anti-market behaviour among the operators and stakeholders of the market, which can otherwise prove to be detrimental for such a market at large.

SEBI’s Authority to Issue Abatement Order

Although there exists no express provision dealing with abatement orders by SEBI, Section 11B of the Securities and Exchange Board of India Act, 1992, (the Act) lays down the provision for the power of the Board to issue directions for fair regulation of the market. Issuing of orders is a sub-set to the said provision. Further, Section 15-I of the Act empowers SEBI with the power to adjudicate which will involve holding an inquiry by an officer not below the rank of Division Chief.

Structure of the Abatement Order

An abatement order by SEBI is arranged in the following manner:

1. Header and Identification:
   Usually, the order begins with the title "Abatement Order" or a phrase akin to it, followed by the SEBI emblem and identification information.
2. Details of the Case:
   The case or infraction for which the abatement order is being issued is described in detail in this section. It might list the specific provisions of the applicable laws or regulations that were infringed as well.
3. Parties Involved:
   The parties concerned are identified, together with any other pertinent parties and the entity or person to whom the order is addressed.
4. Findings and Reasons:
   An explanation or conclusions about the infractions or noncompliance that resulted in the abatement order being issued, is provided in this section. A synopsis of the SEBI probe or inquiry may be included in this section as well.
5. Conditions for Abatement:
   The terms and conditions in this section will be made clear if the abatement order contains any requirements or conditions to lessen fines or other repercussions. Usually, these requirements specify what the entity must do in order to comply with the abatement and receive its benefits.
6. Duration and Compliance Deadline:
   If relevant, there may be a time frame or deadline that the organisation must adhere to for fulfilling the requirements outlined in the order.
7. Consequences of Non-Compliance:
   This section details the repercussions for disregarding the abatement order. This can entail additional fines or judicial action.
8. SEBI's Authority:
   A declaration reiterating SEBI's jurisdiction to make these decisions in accordance with the applicable legal or regulatory framework.
9. Appeal Process:
   Details about the ability to challenge the order, including how to do so and when to do it, is provided in this section.
10. Signature and Date:
    A designated SEBI authority signs the order and adds the date of issuance to such order.

Purpose of Abatement Orders

The primary purpose of an abatement order is to address and rectify a specific issue or problem that poses a risk, nuisance, or violation of market safety or welfare. These orders are typically issued to compel individuals, businesses, or entities to take corrective actions or to cease activities infringing regulations. The key objectives of abatement orders issued by SEBI are provided hereunder:

1. Public Protection:
   To safeguard the public from potential hazards or nuisances that could affect the equilibrium of the market. For example, if anti-competitive trade practices are being carried out by one company per se, that company will be at liberty to fix any price as it will be dominating the market for a necessary product thereby unnecessarily harassing the public in general. Such can be prevented by SEBI issuing an abatement order.
2. Regulatory Compliance:
   Ensure compliance with laws, regulations, codes, or standards set by authorities concerning market governance.
3. Problem Resolution:
   Prompt resolution or mitigation of issues that could negatively impact the public and other players in the market.
4. Putting an end to an ongoing adjudication process:
   With the aid of an abatement order, SEBI often ends an ongoing adjudication process against the defendant if the case turns out to be in his favour, thereby preventing him from getting harassed by the plaintiff.
5. Enforcement:
   Provide a legal directive to individuals or entities responsible for the problem, requiring them to take necessary actions or measures to eliminate or reduce the identified issue.

Consequence of an Abatement Order

The consequences of an abatement order vary based on the nature of the violation, and the severity of the situation. Typically, these orders come with a set of consequences intended to ensure compliance and rectification of the issue. The consequences are designed to encourage prompt and effective action to rectify the issue specified in the abatement order. Compliance usually leads to the cessation of penalties or legal actions. However, repeated or deliberate non-compliance can result in more severe consequences. Here are some common repercussions:

1. Fines and Penalties:
   Non-compliance with an abatement order often leads to hefty penalties or fines. These penalties might escalate over time until the issue is resolved.
2. Forced Compliance:
   In extreme cases, authorities may take direct action to rectify the problem themselves, charging the responsible party for the costs incurred. This could involve shutting down operations, seizing assets, or carrying out corrective actions at the expense of the non-compliant party.
3. Legal Action:
   Continued non-compliance can result in further legal action, such as civil lawsuits or criminal charges. The authorities may seek court intervention to enforce the order.
   1. Injunctions:
      Courts may issue injunctions to compel compliance, restricting certain activities until the violation is resolved.
   2. Criminal Liability:
      In severe cases of non-compliance or violations that endanger public health or safety, individuals or entities responsible may face criminal charges.

Conclusion

As we come to the end of this article, it is notable to mention that abatement orders by SEBI are indeed a measure to bring an end to lengthy litigations which in the long run burdens the court as well as market regulators like SEBI, decreasing its functioning efficiency.

OishikaBanerji ¹