The Securities and Exchange Board of India has threatened 'appropriate action' against the board of directors of Alliance Capital Asset Management and the trustees of Alliance Capital Mutual Fund if an investigation found evidence that they had violated the Sebi Act and regulations.

Confirming its earlier action debarring former Alliance Capital chief investment officer Samir Arora from the equity market "until further orders," Sebi's order on Wednesday questions the accountability of the asset management company and the board of trustees of Alliance Capital, and suggests an investigation into their responsibility.

The order confirms the order passed against Arora on August 9, 2003. Arora was accused by Sebi of indulging in insider trading in certain scrips such as Balaji Telefilms, United Phosphorous, Hinduja TMT, Digital GlobalSoft and Mastek Ltd.

In the order, wholetime Sebi board member T M Nagarajan said the issues brought up by Arora raised the issue of accountability of the board of directors of Alliance Capital Asset Management and the trustees of Alliance Capital Mutual Fund.

The order says: "While the fund manager or the chief investment officer of a mutual fund may be given professional freedom for day-to-day operations, the board of directors of the asset management company should ensure that they function under the board's overall control, direction and supervision."

The order said in this case, a periodical diligent review of the style and strategy of the fund manager could have enabled the board to take necessary remedial action.

According to the order, an asset management company will be responsible for the acts of commission or omission by its employees or the persons whose services have been procured by it.