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With about two months having passed since an ordinance giving extra powers to Sebi lapsed, the regulator is finding it tough to initiate action against entities suspected to be involved in market manipulation and fraudulent activities.
The ordinance, which lapsed in mid-January, had empowered Securities and Exchange Board of India (Sebi) to deal with fraudsters and defaulters more effectively with direct powers to initiate prosecution and recovery proceedings, conduct search and seizure and call for information from others.
The actions already initiated by Sebi, when this ordinance was in force, remain valid and the regulator is moving further in those cases without any problems.
However, the absence of additional powers is coming in way of Sebi clamping down on cases where no proceedings could be initiated during the life of the ordinance, which was promulgated first in July and then in September 2013.
These cases include unauthorised money pooling activities. There are also cases where Sebi has established wrongful activities, but prosecution and recovery proceedings are getting delayed due to absence of direct powers.
The Securities Laws (Amendment) Ordinance, 2013 lapsed in January as a Bill in this regard could not be passed in the Parliament.
If the government decides to promulgate this ordinance again, it would now need to get an approval from the Election Commission, as Model Code of Conduct for polls is currently in place.
During the time when the ordinance was in force, Sebi had initiated more than 300 attachment proceedings in about 65 different cases for recovery of close to Rs 2,000 crore from defaulters and fraudsters, including those having raised money through illicit money-pooling activities.
There is no impact of the ordinance lapse on these cases.
Last month, the Finance Ministry had also said that any actions taken by Sebi under the ordinance would remain "valid and the consequent effects of the same will continue."
Sebi has been seeking these powers for long to better regulate markets and take to task fraudsters and other defaulters more effectively.
Soon after the promulgation of the ordinance, Sebi began exercising these powers and also put in place necessary operational mechanism, including those requiring changes in the manpower deployment.
Under its recovery mechanism, Sebi was authorised to order attachment and sale of defaulter's movable property and immovable properties, freezing of bank accounts, arrest of the defaulter and his detention in prison, as also appointment of a receiver for management of movable and immovable properties.
