Govt declares action by SEBI under ordinance is valid

Last year Sebi was given more powers to check fraudulent investment schemes and other market manipulations

Any actions taken by Sebi under the government ordinance against capital market manipulations, will remain "valid and the consequent effects of the same will continue", Parliament was informed today.

Last year, President Pranab Mukherjee had promulgated an ordinance amending the securities law that provided Sebi with more powers to check fraudulent investment schemes and other market manipulations.

However, the ordinance had lapsed on January 16, 2014 as the Bill in this regard could not be passed in Parliament.

"An ordinance promulgated by the President is of the same force and effect as an Act made by the Parliament," Minister of State for Finance Namo Narain Meena said in written reply to the Rajya Sabha.

"Therefore, any action initiated as per the ordinance issued remains valid and the consequent effects of the same will continue," he added.

The Securities Laws (Amendment) Ordinance, 2013, was promulgated in July, and for the second time in September.

As per the minister, Sebi had issued norms under the ordinance related to collective investment schemes, procedure for search and seizure as well as settlement of administrative and civil proceedings.

In his interim budget speech in the Parliament yesterday Finance Minister P Chidambaram had regretted the non-passage of the Securities Laws Amendment Bill.

To a separate query on whether there was a delay in action against illicit collective investment schemes (CIS) by Saradha Realty India by Sebi, Meena gave out the details of the procedures followed by Sebi since 2010 when the Economic Offences Investigation Cell had informed it about the fund raising activities by the company.

Meena said: "As per the procedure in quasi-judicial proceedings, any party to be proceeded against has to be served with a show cause notice and be given a fair and reasonable opportunity before an adverse order is passed in accordance with the principles of natural justice since the orders of Sebi are subject to judicial review."

After being informed about the CIS activities of Saradha Realty by Economic Offences Investigation Cell, Sebi had on various occasions in 2010 written to Saradha Realty seeking details of its schemes and funds raised from investors, as per the minister's reply.

The regulator had issued a show cause notice to Saradha Realty in December 2011 based on prima facie evidence of unauthorised CIS activities by the company.

Subsequently, as Saradha Realty failed to furnish documents with Sebi, among others, the market regulator had issued orders against the company on April 23, 2013.