Govt works overtime to give SEBI lost powers

The Finance Ministry is set to soon restore powers of the capital market regulator SEBI, which it lost lately on a technicality of law. These powers include curbing illegal deposit-taking by companies, stopping Ponzi scheme and accessing call data records, among others.

“We have sent draft regulation to the Law Ministry. At the same time request has been made to the Speaker of the Lok Sabha to advise the Standing Committee on Finance to give its report on Securities Laws (Amendment) Bill 2013 at the beginning of the Parliament session,” a senior Finance Ministry official told Business Line . These are being done to ensure passage of the Bill at the earliest. The next session of the current Lok Sabha will begin on February 5.

Passage of this Bill is necessary as the ordinance issued in lieu of the Bill lapsed last week after being promulgated twice. Since the Government could not get the Bill passed in the monsoon session, it had no option but to issue an ordinance. The problem arose when the winter session was adjourned sine die on December 18 and not prorogued by the President. Due to this technicality, the ordinance could not be re-promulgated. As a result, SEBI lost its newly acquired powers.

Earlier, based on the ordinance, the Securities and Exchange Board of India had notified five sets of regulations. According to various media reports, powered by this ordinance, the regulator had issued 300 attachments in over 60 cases and recovered a substantial amount of money from defaulters.

The Bill, introduced in Lok Sabha last August, proposes to give SEBI power to seek information, such as access to telephone call data records, from any persons or entities with respect to any securities transaction it is investigating. The regulator can also order search and seizure operations.

It also contains provisions to make registration with SEBI mandatory for pooling of funds in excess of Rs 100 crore. This move comes in the aftermath of the Saradha scam in West Bengal, which highlighted the regulatory gaps and overlaps in the system.

The Ministry also plans to add a ‘curative clause’ in the revised Bill. If approved, this will provide legality to actions taken between the date of lapse of the ordinance and date of enactment of the Bill. “Although actions are being taken on the basis of regulations notified by virtue of the ordinance, still for double precaution, we are proposing a curative clause,” the official explained while adding that actions taken before the ordinance lapsed will be valid.

In the past, there have been instances where actions taken on the basis of ordinances continue to stand even after it lapsed. Among these was Raja Mohammed Amir Mohammad Khan versus Government of India where an ordinance was issued in lieu of the Enemy Property Act. The ordinance restrained the court from returning enemy property. Even after the ordinance lapsed, the property was not handed back.

COMMENT NOW