Par panel for prompt compensation by Sebi in fraud cases

A large number of members suggested setting up of special courts through Securities Laws bill for dealing with cases of duping investors

Members of a Parliamentary panel today favoured prompt payment of compensation to investors in cases of fraud but questioned the proposal of the government to provide more teeth to the Securities and Exchange Board of India (Sebi).

Participating in a discussion on the Securities Laws (Amendment) Bill, 2013, members of the Standing Committee on Finance suggested that small investors should be paid in specific time frame after the Sebi seizes funds during investigation of fraud cases, sources said.

"Why should small investors need to wait till the delivery of judgement by the court. The moment Sebi seizes cash and assets, it should start the procedure for disbursement to investors particularly small ones. Why should it wait till the judgement of courts for liquidating the seized assets?" a member pointed out in the meeting.

The members, according to sources, questioned the decision of the government to provide more powers to the Sebi.

"Is the search and seizure powers vested with SEBI in the present legal framework is inadequate?", a member questioned during the meeting.

The final report on the bill, sources said, was likely to be tabled in the Parliament in forthcoming winter session beginning next month.

A large number of members suggested setting up of special courts through the bill for dealing with cases of duping investors.

The Bill seeks to amend the Securities and Exchange Board of India Act, 1992, with consequential changes in the Securities Contracts Regulation Act, 1956 and the Depositories Act, 1996.

Collective Investment Schemes (CIS) are a class of investment products regulated by SEBI. The Bill widens the definition to include all pooling of funds of Rs 100 crore or above, that are not regulated by any law.

The Bill empowers the Chairman of SEBI to authorise search and seizure of documents relevant to an investigation.

The Bill provides SEBI with explicit powers to order disgorgement of unfair gains. It also permits SEBI to attach bank accounts and property, and arrest and detain a person for his failure to comply with disgorgement orders or pay any monetary penalty. It also seeks to establish special courts to try offences under the Act.