What use is an on-off selective regulator?

"In the Securities and Exchange Board of India's (Sebi's) books, Reliance Industries Ltd made unlawful gains worth Rs 447.27 crore (Rs 4.47 billion) in November 2007, while trading in derivatives of subsidiary company, Reliance Petroleum Ltd (RPL)," writes Mobis Philipose. Shares of RPL were sold at Rs 60 per share at an Initial Public Offering, or IPO, in 2006. Following the IPO, Reliance Industries, the parent company, held 75% of the shares of RPL while Chevron bought a 5% stake at Rs 60 per share, with a provision that it could increase its stake to 29%. "In early November 2007, rumours that Chevron will buy a sizeable stake in the new refinery at a hefty valuation had sent RPL shares soaring to as high as Rs 295 per share." So did Reliance deny the rumors and protect shareholders? No. Instead it sold off shares of RPL at these sky-high prices and then took short positions in the derivatives markets to take advantage of the coming crash in the stock price, making a neat profit of Rs 5.13 billion. To us, who are ignorant of high finance, this is as clear a case of insider trading, which is gaining from share sales through knowledge which only company officials possess, as you can find. Sebi's own rules make insider trading an offense, but instead of filing criminal charges against Reliance officers it has only asked it refund Rs 4.47 billion. Compare that with the prison sentence on Rajat Gupta, who was accused of passing information to his friend Raj Rajaratnam, even though he did not profit personally from the information. Rajaratnam is serving an 11 year sentence. The famous Martha Stewart went to jail for 5 months for selling shares when her broker told her that the directors of a pharmaceutical company, ImClone, were dumping shares of the same company. You would think that a stockbroker is supposed to provide such information. Surely, Sebi should have filed criminal charges against Reliance officials? "But at the end of the day, if the worst that things can get, in terms of monetary consequence, is that you'd have to return unlawful gains, then rather than act as a deterrence, the order may well encourage those who like to live on the edge," writes Philipose. As is usual in India, Reliance has promised to appeal, which means that it will drag on for years. Contrast this with Sebi's hounding of Subrata Roy of Sahara, who has been incarcerated for years for failing to pay back its investors, even though not one investor has complained. In fact, Sebi itself cannot find these investors. Contrast this again with Sebi's foot dragging in the case of DLF, a real estate company, where there was a specific complaint. That had nothing to do with the fact that Robert Vadra, son-in-law of Sonia Gandhi, made around Rs 2 billion from DLF. What use is a regulator which regulates selectively?