 "Govt proposes stronger powers to Sebi to tackle ponzi schemes")
Besides, it has also been proposed to provide Sebi with powers to seek information, such as telephone call data records, from from any persons or entities in respect to any securities transaction being probed by it.
The proposals to make required amendments in the Sebi Act and other relevant regulations have been finalised after detailed consultations with Sebi (Securities and Exchange Board of India) and are being presented before the Union Cabinet for its approval, a senior official said.
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A Cabinet note in this regard has also been circulated by the Department of Economic Affairs to other departments in the Finance Ministry, as also to the Corporate Affairs, Home, Law and Telecom ministries, along with to the Reserve Bank of India, Planning Commission and Prime Minister's Office for their comments and feedback on the proposals.
After getting the Cabinet's approval, the government plans to introduce the Securities Laws (Amendment) Bill, 2013 in Parliament to carry out the proposed changes for grant of stronger powers to Sebi, the official added.
Sebi has been seeking an overhaul of regulations governing its powers and mandate for a long time, given the changing nature of the securities market in general, and newer tools being used by manipulators to take gullible investors for a ride, in particular.
The government has decided to accept most of the proposals made by Sebi in this regard and the amendments would be carried out after the Cabinet approves the move and the required amendment bill is passed by the Parliament, he added.
With regard to the regulation of Collective Investment Schemes (CIS), the proposal calls for Sebi being empowered to deal with all kinds of investment schemes involving pooling of funds totalling Rs 100 crore or more. Also, any investment scheme floated by a 'person' and not only a 'company', has been proposed to be brought under Sebi's jurisdiction for CIS activities.
The proposed amendment seeks to bring all kinds of ponzi schemes, which are thriving in various semi urban and rural areas at the expense of gullible investors, are brought under Sebi's oversight, which itself would be made much more effective to safeguard investors from being defrauded.
Besides, the government has also proposed to provide Sebi with direct powers to conduct search and seizure with authorisation from its Chairman. Currently, Sebi can conduct search and seizure only after approval from the Chief Metropolitan Magistrate, but this provision is often seen to delay proceedings and hamper the confidential nature of probe.
It has also been proposed that special courts be set up to deal with offences under securities laws and to recognise the counsels representing Sebi to be deemed as public prosecutors.
With regard to powers to attach properties, the current provisions do not provide for effective protection of investors in cases where there is fraudulent diversion of monies raised from investors such as 'vanishing companies' and 'Collective Investment Schemes'.
In cases where Sebi passes orders for refund of money raised fraudulently from investors, the concerns have been there with regard to the enforcement of such directions since the regulator does not have any direct powers to attach movable or immovable properties.
The existing powers to freeze assets is available only with regard to an asset forming part of a transaction and it does not provide for a measure to provide remedy to investors from any other assets.
In the high-profile Sahara case, Sebi had passed the attachment orders on the directions of the Supreme Court and even in various other cases the penalties imposed by the regulator have remained unpaid.
Accordingly, Sebi had sought explicit powers to attach and sell movable and immovable properties of defaulters without recourse to any court of law, in pursuance of any order passed by it, or to recover fees and other regulatory charges due from various entities or the outstanding penalties.
As an additional measure, Sebi has also sought powers to make a reference to the Income Tax department for recovery of penalty as tax dues for recovery of uncollected dues. These proposals have also been accepted by the government and would be implemented under the proposed amendments to Sebi laws.
The other proposals include empowering Sebi to obtain or furnish information to other regulators across the world in matters relating to prevention, detection, enforcement and investigation of securities market violations.
Besides, it has also been proposed to grant Sebi stronger powers with regard to the disgorgement and consent orders.
Amendments have also been proposed in the Securities Contract (Regulation) Act and the Depositories Act to ensure consistency and alignment with the changes in the Sebi Act.
While proposals to these effects were being pursued by Sebi for almost four years now, a strong need to push with these changes was felt in the recent months in the wake of a long-running tussle between Sebi and Sahara group.
The recent developments involving an alleged defrauding of lakhs of investors by West Bengal-based Saradha group and other entities in the state have further underscored the need to change the regulations to give greater powers to Sebi.