Market regulator Securities and Exchange Board of India (Sebi) has sought a major overhaul of the securities laws, including greater authority to nail manipulators by way of powers to conduct "search and seizure" operations and to demand information from any person in relation to its probes.
It has also proposed the recovery of monetary penalties through Income-Tax arrear mechanism, setting up of special courts to deal with criminal prosecution for violation of securities laws and recognition of Sebi's counsels as public prosecutors.
The proposals have been discussed by the Sebi board and are being sent to the ministry of finance for necessary amendments to the relevant securities laws, a senior regulatory official said. Sebi has decided to pursue these proposed amendments in view of the challenges faced by it in areas such as recovery and realisation of monetary penalties and regulation of pooling of monies from the public by schemes, including those in the nature of collective investments, among others.
The market regulator has been facing impediments on its investigation and enforcement powers with regard to protecting investments by attachment of assets. It has also faced challenges to enforcement and implementation of its orders, the official said.
In addition, Sebi has been constrained in taking necessary actions against market manipulators as it lacks effective power of search and seizure, and due to limited sharing of information with overseas regulators as well as lack of power to call for information from any person in relation to enquiry or investigation.
Sebi had last sought amendments to the Securities Laws in 2009 and had sent its recommendations to the Finance Ministry.
However, the Ministry later informed it that Sebi should pursue only critical amendments for the time being, as the government had set up a Financial Sector Legislative Reforms Commission (FSLRC) to rewrite and harmonise the entire gamut of financial sector laws.
Accordingly, Sebi in 2011 forwarded a proposal containing only critical amendments to securities laws, which it felt cannot wait long and must be perused independent of the recommendation of the FSLRC.
The Finance Ministry in December had sought certain clarifications with regard to the proposed amendments, pursuant to which Sebi has now decided to limit its proposals to the "most important and critical amendments" and keeping the others for consideration after FSLRC recommendations.