Sebi seeks powers to conduct direct search

Currently, it has to obtain a court warrant for search and seizure operations

The Securities and Exchange Board of India (Sebi) wants the power to conduct search and seizure operations without needing to first get a court warrant. It has begun informal discussion with the finance ministry to amend the law in this regard, said a person with knowledge of the matter.

The markets regulator also wants a single special court in Mumbai for issue of warrants, instead of going to local courts of respective states or different jurisdictions.

Sebi feels its operations in this regard are hampered by companies or individuals easily managing to get a stay on a search warrant issued by local courts. The regulator feels that the system needs reform, particularly on addressing the problem of illegal collective investment schemes.

ASKING FOR MORE TEETH

• Market regulator Securities and Exchange Board of India had got power to attach, access call records and arrest defaulters in August 2014
• The regulator’s operations face hindrance due to information leak; time required for obtaining court approvals
• Sebi has had informal discussions with the finance ministry to amend the law

“An ordinary or local court is not equipped with (the knowledge of) Sebi laws and procedures. This (move) will give more room to the regulator,” said R S Loona, managing partner in Alliance Corporate Lawyer.

There have been instances in the past when information on Sebi’s search operations have got leaked, resulting in destruction of evidence, said sources. "Direct search powers will enable the regulator to prevent information leaks,” said a legal expert who did not wished to be named.

In August 2014, the Centre amended the Sebi Act to give the regulator more teeth, such as powers to attach properties, access call data records and arrest defaulters. The powers were in line with those of the income tax (I-T) department. However, unlike the latter, Sebi has to first seek permission from courts to conduct some of these operations, including search and seizure.

“Sebi as the market regulator is always perceived as a watchdog and not a bloodhound. However, the white-collar frauds taking place are causing detriment to the investor and to the capital market,” said Advait M Sethna, special counsel for the I-T department.

At present, search warrants obtained by Sebi need to be returned to the chairman after being executed, along with the seizure memo, within the authorised time.