Shareholders’ Plea: Quit The Board, As Moral Turpitude Is Implicit In Disgorgement

SEBI, the capital markets regulator, has been aggressively issuing orders against entities found violating rules and making illegal gains using unpublished price sensitive information or ‘UPSI’. These orders involve consent terms for the violation and settling without admitting guilt, and also a component of ‘Disgorgement’. The term ‘disgorgement’ is defined as “the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion. This brings us to a bigger and more important point of moral turpitude. Does an individual who sits on a board of a listed company as an independent director and has disgorged an amount to a regulator along with the promoter of the same company for illegally benefiting from USPI committed moral turpitude? The fact that he has used the same information as the promoter has, is testimony to the fact that he is no longer independent. Similarly, when a senior officer of an I-banker acts in a similar manner and disgorges money, the fact that he has settled consent terms amounts to having committed a breach of confidentiality. In such cases without exception, strictest of action needs to be taken and the concerned person should be asked to leave. It is time for Corporate India and minority shareholders to take the matter of ‘UPSI’ seriously and demand that action be taken against erring individuals.