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Tuesday, Jun 11, 2002

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SEBI gets powers for search, seizure -- Stiff penalty for offences

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THE Government has decided to grant search and seizure powers to the capital market watchdog, the Securities and Exchange Board of India (SEBI) in cases relating to insider trading and market manipulations.

This was decided at a meeting here on Monday between the Secretary, Department of Economic Affairs (DEA), Mr.C.M.Vasudev, the Secretary, Department of Company Affairs (DCA), Mr.V.K. Dhall, and the Chairman of SEBI, Mr.G.N. Bajpai.

The Finance Ministry and the DCA are also now in agreement on the monetary penalties to be imposed for minor offences. The penalties for minor offences will now be Rs 1 crore. For major offences like insider trading and market manipulations it will be three times the amount involved in the offence or Rs 25 crore whichever is higher, according to officials.

The SEBI Act now empowers the capital market regulator to impose a maximum penalty of only Rs 5 lakh irrespective of the nature of the offence.

The proposal to arm SEBI with these powers will now be a part of the amendments to the SEBI Act, now in the process of being drafted again. Following the reservations expressed by the DCA on granting these powers to the capital market regulator, the Finance Ministry has agreed to provide adequate safeguards against any possible misuse.

These will include obtaining an approval from the designated Court as done by the banking regulator, RBI besides approval from the SEBI board.

The SEBI Chairman can exercise the powers of the board in certain circumstances and later get the decision ratified.

"The mechanism for granting these powers is still being worked out. Officials of the Finance Ministry will be sitting with the officials of Law Ministry to work out the modalities and safeguard measures,'' a senior official said. The issue of penalties was not discussed at today's meeting, officials said.

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