Financial Daily from THE HINDU group of publications
Thursday, May 02, 2002
Regulatory Bodies & Rulings
Corporate - Regulatory Bodies & Rulings
Safeguards likely in SEBI's search & seizure powers
NEW DELHI, May 1
THE Finance Ministry has provided new safeguard provisions, including mandatory approval, by the board of the Securities and Exchange Boards of India (SEBI) board for exercising the proposed search and seizure powers for the capital markets regulator.
In a fresh Cabinet note, the Ministry has recommended that these powers be granted to SEBI subject to the condition that the regulator meets the safeguard provision against any possible misuse of these powers.
Following the resistance of the Department of Company Affairs (DCA) to the proposal in the earlier Cabinet note to grant search and seizure powers to SEBI, the Ministry has recommended that such powers be exercised only after obtaining the approval of the SEBI board. The other safeguard provision, which is being built in, is to seek the approval of a designated court prior to exercising these powers as part of the investigation process.
The second provision is patterned on the lines of the RBI Act where the central bank seeks the approval of a court for seizing books and documents during its investigations.
The Finance Ministry had withdrawn the earlier Cabinet note, which proposed several amendments to the SEBI Act. The Law Ministry, according to senior Government officials, is now vetting the fresh note. The DCA had put up a resistance against the proposal to grant search and seizure powers apprehending misuse of these powers. It was earlier proposed to empower the Chairman of SEBI to exercise these powers.
The DCA's opposition to this proposal had prompted the Ministry to introduce more checks and balances to prevent any possible misuse of powers of investigation, rather than yield to the demand for scrapping this provision in toto.
The DCA's resistance to this provision is generally perceived to be more of a turf war as the powers relating to investigation of companies is vested with the department under the Companies Act.
The Ministry has, however, taken the view that SEBI could indeed seek these powers at least in respect of offences committed by the listed companies, market intermediaries and other market players.
The previous Chairman of SEBI, Mr D.R. Mehta, had made out a strong case for empowering SEBI, especially on the investigation front. Following his plea, the Finance Ministry proposed to grant these powers in the amendments to the SEBI Act.
The other major amendments to the SEBI Act include a substantial increase in monetary penalties. The proposal now is to hike the penalties from the existing maximum limit of Rs 5 lakh to Rs 25 crore or three times the amount involved in the offence.
The SEBI board will also be expanded to include four more full-time members, besides the Chairman.
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