SEBI is waiting for forensic audit reports on credit rating agencies which will give a clearer picture of wrongdoings. The forensic audit or investigation report from Care, ICRA and India Rating may come out in a month's time.
A source close to the development told Moneycontrol, "SEBI is awaiting forensic audit report on credit rating agencies which will give much more substance in IL&FS case and may issue fresh show cause notice in section 11 (B) which gives power barring them from the market and claw back amount from concerned officials who had done rating".
Section 11B is one of the stringent sections of the SEBI act. In this section, SEBI can a) suspend the trading of any security in a recognised stock exchange;
(b) restrain persons from accessing the securities market and prohibit any person associated
with securities market to buy, sell or deal in securities;
(c) suspend any office-bearer of any stock exchange or self-regulatory organisation from
holding such position;
(d) impound and retain the proceeds or securities in respect of any transaction which is under investigation.
SEBI has sent new show-cause notices for higher penalty with Rs 1 crores with uses of section 15 (I) last week.
On December 26, SEBI has put a penalty worth of Rs 25 lakhs on each credit-rating agency in section 15 HB where the highest penalty is Rs 1 crore.
SEBI has revised the penalty after feedback on lesser penalty on credit rating in IL&FS case which is more than Rs 98,000 crores.
A source close to development told Moneycontrol, "SEBI sent a show-cause notice which did not have much substance,and Rs 25 lakh is the highest penalty against any intermediary. Earlier, SEBI put a penalty of Rs 5 lakhs which was also not standing in the Securities Appellate Tribunal in section 15HB."
SEBI rarely used section 15 (I) for reviewing adjudication order.
Grant Thornton has done forensic audit in respect of IL&FS. In that report, GT found many anomalies in rating IL&FS but which was not enough to take action in section 11 (B). The forensic audit, supposed to be submitted in December, may take a month more.
On the other side, the Serious Fraud Investigation Office also submitted their report on rating agencies in the next two-three months. On February 2, Ministry of Corporate Affairs Secretary Injeti Srinivas and director SFIO reviewed the status of investigation at the Mumbai Zonal office.
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