SAT asks Sebi to probe misleading ads promoting company shares

The Securities Appellate Tribunal (SAT) has asked Sebi to look into issuance of misleading and fraudulent advertisements by a company to promote its shares, but has rejected a plea seeking compensation for losses suffered in purchase of shares due to such ads.. The tribunal issued this direction while hearing an appeal by two individuals against Vital Communications Ltd (VCL), Sebi and the BSE, wherein they sought a compensation of Rs 51.53 lakh for losses suffered by them due to alleged misleading advertisement by this company about its shares.. The appellants said they had traded in the shares of VCL between May 23, 2002 to June 25, 2002, after seeing "misleading advertisements published in various newspapers particularly as regards issue of buy-back as well as bonus shares".. They contended that both the schemes of buy-back and bonus shares did not materialise at all and in the process they suffered huge losses.. Rejecting their plea for the compensation, SAT said in an order dated April 30 that there is "no directive or mandate in any of the measures empowering Sebi to undertake the task of considering and granting compensation to an investor for the alleged losses he might have suffered due to certain misleading or fraudulent advertisements by a company".. However, SAT directed the market regulator to look into the complaints about the company falsely representing its shares in print advertisements, thereby deceptively alluring the general public.. SAT has asked Sebi to convey the outcome of the probe to the individuals on completion of the investigation proceedings which are stated to be at an advanced stage.. "Needless to say that in case Sebi finds VCL guilty of playing fraud on the investors, it may consider directing the concerned entity or VCL to refund the actual amount spent by the appellants on purchasing the shares in question and with appropriate interest and as per law," SAT said.. The complainant had said that VCL had adopted unfair and deceptive trade practice through advertisements in a newspaper and on the websites of BSE, wherein it was falsely represented that the shares were of a very high grade and standard.. However, SAT said, "BSE appears to have acted in transparent manner, within the four corners of law and the agreement between the two.. "Therefore, the act of the appellants of involving the Exchange in the wrongs, if any, committed by VCL is totally improper and unjustified," the tribunal added.. The appellants had first approached the consumer forum with their grievances, but were asked by the National Consumer Disputes Redressal Commission in 2010 to approach Sebi.. However, Sebi declined their request for compensation saying it did not have jurisdiction to grant compensation to the investors who incidentally suffer losses in the process of purchasing/selling shares in the open market.

SAT asks Sebi to probe misleading ads promoting company shares

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