The Securities Laws (amendment) Bill, 2014, which was approved unanimously by the Lok Sabha on Wednesday, allows SEBI to issue disgorgement orders.
SEBI, in its little over two decades of existence, has issued disgorgement orders only on two occasions; once, in 2006, during the IPO irregularities issue, and for the second time in the Satyam Computer scandal.
The money collected will now be parked in SEBI’s Investor Protection and Education Fund.
This fund should not be confused with the Investor Education and Protection Fund that has been set up under the company law, Finance Minister Arun Jaitley clarified during a parliamentary discussion on the Bill.
“They are two separate funds. The IEPF under SEBI will have disgorged monies from the regulator’s directions. The other investor protection fund maintained under the company law is mainly unclaimed dividends,” Jaitley said.
Currently, the Fund under the company law has a corpus of about ₹830 crore.
Over the last one year — since the promulgation of an ordinance to initiate action against illegal deposit-taking schemes — the IEPF under SEBI has garnered a corpus of ₹30 crore.
“This move to explicitly empower SEBI to issue disgorgement orders is a big thing and augurs well for investor protection. So far, SEBI saw it only as an implicit power. Now that it will be explicit, SEBI will, in all its actions, first look at the possibility of disgorgement from the offenders,” MS Sahoo, Secretary, Institute of Company Secretaries of India, told BusinessLine .
Financial inclusion Jaitley also said that Prime Minister Narendra Modi will, in the next few days, announce a financial inclusion project that would seek to open two bank accounts in each of the 7.5 crore families identified for the exercise.
Once a financial inclusion project of this dimension is launched, the attraction of Ponzi schemes will come down, he added.