Action likely soon on more powers to Sebi

The Securities and Exchange Board of India (Sebi) will soon get more teeth to crackdown on violators in a more effective manner.

The market regulator is likely to get new powers, such as recovery of monetary penalties with the help of the Income Tax department, power to attach properties without recourse to courts, power to pass disgorgement orders and establishment of special courts to deal with criminal prosecution for violation of securities laws.

Although, Sebi had been requesting the government to grant some of these powers for almost four years now, a mention in the Budget speech has increased the likelihood of amendments to the Sebi Act soon.

The finance minister, in his Budget speech on Thursday, said "A proposal to amend the Sebi Act to strengthen the regulator is under consideration."

Some of the other demands of Sebi include: counsels representing Sebi to be deemed as public prosecutors; power to call for information from any person in relation to an inquiry or investigation; power to share information with overseas regulators; power to regulate un-regulated money raising schemes and seizure powers without recourse to a court of law.

Most of these proposals stem from the difficulties faced by Sebi while handling unauthorised collective investment schemes (CIS) and its inability to recover money from the offenders.

The market regulator had recommended to the government to make certain amendments to the Sebi Act as far back in 2009. However, as the Financial Sector Legislative Reforms Commission (FSLRC) was set up by the government to rewrite financial sector laws, Sebi's demands were put on the back-burner.

In 2011, the government asked Sebi to pursue only critical amendments that couldn't wait till securities laws get amended through FSLRC. Later that year, Sebi had forwarded a proposal containing only critical amendments to securities laws, which were hampering its ability to effectively regulate and develop the securities market.

Again in November 2012, Sebi wrote to the government to make suitable amendments as it was facing difficulty in cracking down on certain CIS.

However, given that FSLRC is going to present its report next month and the FM has said the government would quickly act on it, it remains to be seen whether all of the proposals made by Sebi get accepted.