Home Ministry Averse To Search, Seizure Powers For Sebi

The home ministry has objected to giving more powers to the Securities and Exchange Board of India (Sebi) to expand the scope of its search operations on companies and brokers.

In its comments on the Cabinet note to expand the powers of the market regulator, the ministry has informed the finance ministry that expanding the scope of search and seizure operations of Sebi will interfere with the role of the other law enforcing agencies such as the Central Bureau of Investigation (CBI). The objections are expected to delay the finalisation of the amendment of the Securities Contract Regulation Act (which governs the market regulator) a step promised by the finance minister in March this year as part of the three pronged effort to cleanse the stock markets.

Meanwhile in an effort to drum up support for the passage of the bill, Sebi will depose before the Joint Parliamentary Committee tomorrow on the extent of its powers and the limitations that it suffers from. Sebi officials said the deposition will also cover the scope of the changes that the market regulator has proposed in the act. The JPC members had informed the finance ministry that they want to examine the scope of the changes before the amendments are finalised.

The committee members will also get a chance to quiz the ministry officials on various aspects of the amendments. According to Sebi sources with the government keen to get the bill cleared as an ordinance soon, tomorrow is a good opportunity to convince the JPC members about the need for the amendments. Sebi has repeatedly said that its powers of inspection are limited to only matters relating to issue and transfer of securities and non payment of dividend in case of listed companies. It has also complained that there is no formal system of sharing inspection reports between the department of company affairs and itself.

The department of company affairs has also finally cleared the draft proposals with its legislative department satisfying itself with only technical changes. The proposed ordinance will increase the number of members on the board of Sebi from four to six, increase the penalty on companies and brokers for violation of rules for listing and enhance its powers for on site inspection of companies.