DISGORGEMENT - A Beautiful Word from Indian Regulators!!!!

Before Wednesday last, it is doubtful many people would have heard of ‘disgorgement’, especially in the context of share markets. We’ve all heard of someone gorging herself on chocolate or ice cream and, on occasion, have done it ourselves. But, disgorgement?

That’s a new one for most. But then that was before the capital market regulator’s (Sebi) second interim order on the initial public offering (IPO) scam hit us like a bolt from the blue. And suddenly all discussion everywhere, especially among those with any interest in the stock market, and that includes most readers of this paper, turned to disgorgement.

That’s the good thing about these Sebi orders. Some might call them high-handed but at the end of the day, you have to hand it to the capital markets’ regulator. Thanks to its efforts, words that might otherwise have remained esoteric become, well, mainstream. Almost

For instance, whoever had heard of ‘afferent accounts’, not to be confused with different accounts, until Sebi’s previous order referred to afferent accounts being opened with unseemly haste by depository participants and a quick reference to the dictionary confirmed these to be accounts that act as conduits, as in nerves that conduct impulses from the periphery of the body to the brain or spinal cord.

So what is disgorgement? The dictionary defines it, among other things, including things not discussed in polite society, as ‘unwilling surrender’. The Sebi order is more precise. It describes it as a method of forcing a defendant to ‘give up the amount by which he or she was unjustly enriched.’

Based on its investigation, Sebi has therefore directed the two main depositories, NSDL and CDSL and eight depository participants to disgorge a sum of Rs 116 crore. These 10 entities, the Sebi whole time member has decided, are guilty of actions for which the only appropriate punishment is ‘disgorgement’.

True, ‘disgorgement’ presumes those held guilty to have engorged themselves in the first place - the US Securities and Exchange Commission, for instance, orders disgorgement of profits made by persons who have engaged in insider trading. And Sebi has found no evidence of any ill-gotten gains.

The bottom line is, many thousands who found their dreams of instant riches turn to dust thanks to the machinations of the Rupal Behn and Co can now look forward to justice. Better still, the next time they are taken for a ride by some scamster, they needn’t hope and pray that he gets his just deserts; just disgorgement would do as well, even better!