 "Ordinance to empower Sebi cleared")
It will also get the task of regulating those non-banking financial companies (NBFCs) collecting at least Rs 200 crore, which hitherto do not fall under any watchdog, a senior finance ministry official explained. The ordinance will also empower Sebi to seek information such as records of telephone calls from any entities or persons in respect to any share transaction being investigated by it.
An ordinance to this effect was cleared by the Cabinet on Wednesday. The move is aimed at tightening the checks on chit fund companies floated under other garb to get around the rules, in the aftermath of the scandal concerning the Bengal-based Saradha Group which left scores of investors high and dry.
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Currently, the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, is a central one, enforced by states. Since it bans prize chit fund companies, the question of regulating these do not arise. Many chit fund schemes are being launched under other garb, officials said.
NBFCs have to get a licence from the Reserve Bank of India to start operations, but there are many fraudulent schemes being operated under various names to avoid regulatory control.
Sebi already regulates collective investment schemes. These are a way of investing money alongside other investors to benefit from the inherent advantages of working as part of a group.
The ordinance will empower the regulator to have direct powers to carry out search and seizure operations and for attachment of assets of those probed by it. This means the Sebi chairman would have the powers to authorise search and seizure.
Currently, Sebi can do this only after approval from the chief metropolitan magistrate, a provision often seen as delaying proceedings and hampering the confidential nature of a probe.
After the ordinance, the government is planning to bring the Sebi Laws (Amendment) Bill before Parliament, incorporating the changes.
The regulator has been pressing for an overhaul of the legal framework to enable the catching of companies taking gullible investors into a ride.
The ordinance was formulated after detailed discussions with Sebi by the government. This is the second occasion when the government has opted for an ordinance route before commencement of the monsoon session of Parliament on August 12.
Last month, the government had promulgated an ordinance for food security.
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