Sinha not pleased as Sebi Bill seems stuck in limbo

Regulator may not be able to issue fresh attachment orders

Securities and exchange Board of India (Sebi) Chairman UK Sinha has expressed concern over the lapse of the ordinance issued to give the market watchdog more powers to crack down on ponzi schemes.

The Securities Laws (Amendment) Second Ordinance, 2013, promulgated by the government in July 2013, lapsed earlier this month. Following this, Sebi won’t be able to pass attachment orders against entities from which it has to recover dues.

While the ordinance was valid, Sebi had initiated about 300 attachment proceedings in about 60 different cases to recover about Rs 2,000 crore from violators.

Speaking on the sidelines of a National Stock Exchange interest rate futures launch on Tuesday, Sinha said, “After two rounds of ordinance, it could not be passed (by Parliament) and now, it has lapsed. This will have implications. Let us see how we proceed.” He, however, said the regulations introduced during the ordinance period would remain valid.

REGULATORY SEE-SAW

JULY 2013: Government promulgates Securities Laws (Amendment) Second Ordinance, 2013. It also presents the Securities Laws (Amendment) Bill, 2013, in Parliament
AUGUST 2013: Sebi board forms an action plan to make use of new powers. Subsequently, it issues draft regulations on consent settlement, search and seizure
DECEMBER 2013: Parliament’s standing committee defers adoption of draft on the Bill. Parliament fails to pass the Bill during the Winter session. Sebi, meanwhile, notifies new regulations, based on the ordinance
JANUARY 2014: The ordinance lapses on January 15; Sebi loses powers to attach properties, conduct search & seizure operations

“It’s on Parliament and the government to decide what powers they want to give to Sebi,” he added.

The Securities Laws (Amendment) Bill, 2013, which would have permanently given Sebi new powers, couldn’t be passed during the winter session of Parliament.

The Securities Laws (Amendment) Second Ordinance, 2013, had empowered Sebi with powers similar to those of the Income Tax Department, in terms of conducting search & seizure operations. It also gave Sebi the power to attach properties, disgorge ill-gotten gains and crack down on collective investment schemes.

In the recent past, Sebi has notified several new regulations, including the Sebi (Procedure for Search and Seizure) Regulations and Sebi (Settlement of Administrative and Civil Proceedings) Regulations, to avail of the new powers.

Experts said the action taken by Sebi before the lapse of the ordinance would be valid.

In December 2013, Finance Minister P Chidambaram had said the government might have to re-promulgate the Sebi ordinance for “an unprecedented third time” if the Bill to replace the ordinance wasn’t passed in the winter session of Parliament.