The Hindu Business Line : SEBI granted powers for search & seizure

THE capital market watchdog, Securities and Exchange Board of India, has finally been empowered, with enough teeth to take on manipulators and players violating its regulations.

For long, the regulator had complained about inadequate powers to punish those indulging in market manipulations and other violations. On Monday, the Cabinet approved an Ordinance granting most of the powers sought for by the regulator, after a string of scams rocked the market in the last few years.

The Ordinance which seeks to amend the SEBI Act will empower the regulator by hiking the monetary penalties for various offences to either three times the undue gains made by a market player or a maximum of Rs 25 crore. The SEBI Act now prescribes a maximum monetary penalty of Rs 5 lakh.

SEBI has also been granted powers to search and seize books of accounts and other documents of stockbrokers and intermediaries, after obtaining the approval of a magistrate. It can also call for information from banks and institutions.

The Government has also sought to make SEBI more of a board-driven institution, to correct the perception that powers are concentrated in the hands of the chairman. The SEBI board will now be strengthened with three more members, taking the total to nine. Of this, three will now be full-time members, excluding the chairman.

The SEBI chairman's right to exercise emergency powers of the board has now been restricted. The exercise of such powers will have to be ratified by the board later.

Going by the Ordinance, the Securities Appellate Tribunal (SAT), which is now a single-member tribunal, will be made a three-member body. The Presiding Officer of SAT will now be a serving or retired judge of the Supreme Court or serving or retired Chief Justice of a High Court.

SAT is the next level of appeal for those who want to appeal against the orders passed by SEBI.

The Government has empowered SAT and courts to compound offences. Besides, appeals against SAT orders can now be taken up before the Supreme Court only on points of law.

Although the SEBI regulations clearly set out the definitions of offences, the Ordinance seeking to amend the SEBI Act will clarify and define offences like insider trading, fraudulent and manipulative trade practices and market manipulation.

All these changes would address the problems faced by SEBI recently in tackling the misconduct of market players.

The regulator had said in the past that it had been hampered by the lack of adequate powers to punish offenders.

The Government has also decided to select the chairman and other members of SEBI based on the recommendations of a selection panel.

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