Column : Sebi gets it right on consent orders

May 29 2012, 02:12 IST
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SummaryProposes to link consent amounts with the nature and size of the violation; shows it has learnt from previous errors.

Last week, Shah Rukh Khan patronisingly offered to pay the fine for his public offence of smoking—his tone implied that the fine was complete redemption. This reminded me of our youthful calculation during our hostel days at Delhi University, comparing the cost of paying bus fees (R2 per trip) with paying the fine for ticketless travel (R20). Given the crowded DTC buses with overwhelmed conductors, many day scholars with genuine monthly bus passes, and short travel distances, we estimated that the odds of getting caught without a ticket—lower than 1 in 10—made it rational to not buy tickets and pay the fine when caught. This calculation is repeated today in many situations involving fraud, corruption or wrongdoing in India because of the lack of punitive consequences and low enforcement capabilities. But, as I get older, I realise that a fine should be large enough to matter, should have more social consequences than a fee, and some acts must not be subject to undoing by paying a fine. Sebi’s revisions to the consent order process restricting certain offences last week reflected this wisdom.

This issue is wonderfully highlighted in a new book called What Money Can’t buy: The moral limits of markets by Michael Sandel. Sandel is a Professor of government at Harvard, whose legendary course “Justice” is available free online ( This book—a bit heavy and preachy in parts, but nonetheless a great read—laments the drift from a market economy to being a market society where every act is monetised. He makes the case for a distinction between fines and fees. Fines register moral disapproval i.e. acts or an attitude that as a society we want to discourage, whereas fees are simply prices that imply no moral judgment. Sandel looks down upon a metro-riding youth in Paris who dodge the $2 single fare or monthly pass of $74 by paying $8.50 per month into an illegal insurance fund (called amutuelle des fraudeurs) which pays the fine of $60 for any of its members caught travelling without a ticket. Sandel worries about other situations: the $31,000 fine for violating the one-child policy in China, which most Chinese can’t afford, but many rich Chinese don’t mind paying, and the trading schemes that allow companies to buy the right to pollute. Interestingly, he supports Finland, which links fines for driving above the speed limit to the income of the offender—Jussi Salonja, a twenty-seven-year

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