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The Supreme Court of India has recently ruled that the Securities and Exchange Board of India is required to disclose the investigation report prepared by an investigating authority[underRegulation9oftheSEBI(ProhibitionofFraudulentandUnfairTradePractices)Regulations2003toapersonwhohasreceivedashowcause(advised)notice[underRegulation9oftheSEBI(ProhibitionofFraudulentandUnfairTradePractices)Regulations2003toapersonwhohasbeenissuedashowcausenotice(noticee)[envertudurèglement9durèglementSEBI(Interdictiondespratiquescommercialesfrauduleusesetdéloyales)de2003àunepersonnequiareçuunavisdejustification(avisé)[underRegulation9oftheSEBI(ProhibitionofFraudulentandUnfairTradePractices)Regulations2003toapersonwhohasbeenissuedashowcausenotice(noticee)
This was done because the report is “an intrinsic part of the Council’s satisfaction in determining whether there has been a violation of the regulations.”
This judgment is a welcome change because the regulator will now have to disclose its investigation report, barring exceptions. SEBI can no longer select documents for disclosure at the auction stage. The Supreme Court has ruled unequivocally that the test for disclosure is “relevance” and a simple ipse dixit from SEBI on this front will not suffice in the face of a party’s right to have the material used against it placed on the record.
In doing so, the Supreme Court put the regulator and the adviser on an equal footing by reducing information asymmetry in arbitration. However, it is likely that by leveling the playing field, this judgment paved the way for delaying tactics on the part of the noticees.
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