New Delhi, 22 July
In a major upgrade of powers given to the Securities and Exchange Board of India, the government has allowed it to pass orders like search and seizure, attachment of properties, arrest and detention of defaulters and pass disgorgement directions to recover the wrongful gains made in contravention of laws.
At the same time, the government has also allowed the Sebi to seek information from other regulators within India and abroad with retrospective effect, paving way for collection of details pertaining to cases pending for over 15 years now.
In another retrospective change, which forms part of the Securities Laws Amendment Ordinance promulgated by the President of India last week, the individuals and companies being probed by the Sebi can settle their pending investigations. Such settlements can be undertaken in cases that are currently pending for more than six years.
To tackle the growing menace of ponzi schemes being floated as collective investment schemes (CIS), the rules have also been amended to classify any money collection of Rs 100 crore or more as CIS operation. The Sebi has been given powers to crack down on illegal investment schemes floated by individuals as well, as against companies only as of now.
However, all government-notified schemes would be out of the collective investment scheme framework.
The changes are part of as many as 22 amendments made by the government in three main Acts governing the Sebi and its operations ~ the Securities and Exchange Board of India (Sebi) Act, the Securities Contracts Regulation Act (SCRA) and the Depositories Act ~ through a 16-page Ordinance. Among others, the Sebi has also been given powers to pass disgorgement orders for amount equivalent to wrongful gains or to losses averted by contravention of regulations.
On settlement, the Ordinance provides that any person, against whom any proceedings have been or may be initiated by the Sebi under certain sections, may file an application to the Sebi proposing for settlement of such proceedings for the alleged defaults.
After taking into account the “nature, gravity and impact of defaults”, the Sebi can accept or reject such a settlement on payment of an amount to be decided by the regulator, subject to various terms and conditions. However, no appeals can be made against Sebi’s decision in these matters.
The settlement provision has been made applicable retrospectively with effect from 20 April 2007.
For speedy trial of offences under various Sebi regulations, the Ordinance also provides for setting up of “as many special courts as may be necessary” by the central government.
Such courts would consist of a single judge to be appointed by the central government with concurrence of the Chief Justice of the high court within whose jurisdiction the judge is working.