From being just a stock market regulator, the Securities and Exchange Board of India (Sebi) has now become the watchdog for all investment-related products, which includes ponzi or illicit money collection schemes.
The government has decided to hand Sebi sweeping powers that include seeking any information for investigation, conducting search and seizure operations, and disgorgement to recover ill-gotten gains from violators.
The enhanced powers given to Sebi are similar to the income tax department. The government has put the onus on Sebi to crack down on such schemes by bringing collective investment schemes (CIS) under its ambit.
For implementation, Sebi's board has readied an action plan. However, Sebi is facing challenges with regard to its staff strength. It regulates nearly 70,000 entities, but has a staff strength of less than 700 while the US's Securities and Exchange Commission (SEC) and UK's Financial Services Authority (FSA) have a staff strength of over 4,000 each. South Korea's integrated financial regulator, which oversees just 3,000 intermediaries, has a staff strength of 1,700.
The regulator has already embarked on one of its biggest recruitment drives to hire 75 professionals from various streams.
Sebi is in the process of framing new regulations and will soon announce regulations pertaining to search and seizure operations and also disgorgement. It will also prescribe guidelines for officers deputed for recovery of money through attachment and sale of assets.
There are plans to deploy more staff, with legal background, to conduct operations like search and seizure and disgorgement. Sebi will tie up with other regulators, not just domestic, but international and also plans to request the government for designated special courts.
Lack of adequate powers were crippling Sebi's efforts against securities law violators. Earlier, search and seizure operations were done with the approval of a magistrate. There have been instances where shares were lying in the demat account of the defaulter, but Sebi had not been able to sell them and recover dues.
Experts say, the new powers have given Sebi the necessary wherewithal and will make it one of the most powerful regula- tors in the country, but whether the new powers will help in safeguarding investors, is the question.
