Sebi attachment orders cross 1,300-mark; Govt readies new bill

The ordinance, which had to be promulgated thrice to empower Sebi to pass attachment orders and launch recovery proceedings against fraudsters and market manipulators lapsed today

As the government readies a new bill for empowering Sebi to take on fraudsters and defaulters, the number of attachment orders passed by the capital markets watchdog with the help of an ordinance has crossed 1,300-mark for recovery of penalties and dues in nearly 400 cases.

The ordinance, which had to be promulgated thrice to empower Sebi to pass attachment orders and launch recovery proceedings against fraudsters and market manipulators, including those running illegal deposit schemes, lapsed today.

To ensure that the Securities and Exchange Board of India (Sebi) retains powers to act against fraudsters and other defaulters, the government is readying a new Securities Laws (Amendment) Bill, 2014, sources said.

A proposal in this regard would soon be placed before the Union Cabinet and the bill would be subsequently introduced in the Parliament for passage, they said, while adding that the new Bill could be different from the Ordinance and would have more safeguards to balance the new powers for Sebi.

The proposed bill would amend three Acts -- the Sebi Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996 -- which govern the entire gamut of regulating the Indian capital markets.

Before the expiry of the third ordinance, an emergency measure initiated when the Parliament is not in session, the regulator managed to launch at least 1,358 attachment proceedings in 389 different cases for recovery of well above Rs 1,600 crore worth assets from banks and demat accounts of hundreds of defaulters.

The proceedings in these cases would continue irrespective of the ordinance having lapsed. In the last week itself, more than 100 attachment orders were passed by Sebi, while at least 68 such proceedings were initiated in a single day on July 17.

The final numbers may increase further as details may not have been uploaded on Sebi website for all attachment and recovery proceedings initiated by the regulator under its Ordinance-given powers.

These include action against various entities running illicit money-pooling activities, while recovery proceedings have also been launched against those refusing to pay the disgorgement amounts, penalties and fees payable to Sebi.

While Sebi was established more than 25 years ago, it has got direct recovery powers to act against those refusing to pay penalties and other dues only through this Ordinance.

The new recovery proceedings include attachment of bank and demat accounts, attachment of movable and immovable properties, appointment of receivers for management of attached properties and arrest and detention of defaulters.

According to a senior official, Sebi has already completed recovery in many cases while recovery process is in advanced stages in many other instances.

Prior to the promulgation of the Ordinance, Sebi had to follow a time-consuming process of filing prosecution against the defaulters and fraudsters and the number of defaulters refusing to pay the dues had crossed 1,300 last year.

Besides, Sebi had also directed various entities to refund money collected illegally from investors through more than 600 unauthorised Collective Investment Schemes, wherein these entities had collected more than Rs 1,500 crore.