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Sebi board approves new norms for exercise of enhanced powers

Mumbai, Dec 24, 2013 (PTI):
PTI Photo

To ensure greater efficacy in exercise of its new powers, market regulator Sebi's board today cleared new norms for its search and seizure operations, settlement proceedings, refund to investors and crackdown on illicit money-pooling schemes.

The new norms also seek to ensure that sufficient safeguards are put in place to avoid any misuse of its new powers and the required privacy of individuals is granted while conducting search and seizure operations.

At the same time, detailed regulations have also been put in place for settlement of admistrative and civil proceedings in a transparent manner, while ensuring that serious offences like insider trading are kept out of settlement window.


The decisions were taken at a board meeting of the Securities and Exchange Board of India (Sebi) here today, which is also believed to have discussed matters like new Corporate Governance Code for listed companies, revision of insider trading norms and a new framework for Real Estate Investment Trusts (REITs).

However, a final decision is yet to be taken on corporate governance code, REITs and new insider trading norms, sources said.

The seven decisions announced by Sebi after the board meeting also included doing away with mandatory IPO grading, prospectus being valid for one year for multiple draft offers, and a tax treatment similar to FIIs being accorded to FPIs (Foreign Portfolio Investors), a newly created class of overseas investors.

As many as four decisions are related to the promulgation of an ordinance by the government for grant of greater powers to Sebi to check mushrooming of illegal money-pooling schemes across the country and to take strict actions against fraudsters and market manipulators.

Among others, Sebi board approved an amendment to Sebi's Investor Protection and Education Fund (IPEF) Regulations, enabling utilisation of such amounts primarily for restitution to investors and in case of failure of identification of investors, for the credit of disgorged amounts to this Fund.

Besides, the board also approved an amendment to the Sebi Collective Investment Schemes (CIS) Regulations.

The government ordinance, promulgated in September for second time, provides for regulation of pooling of funds under any scheme or arrangement, involving a corpus amount of Rs 100 crore or more, to be deemed to be a CIS activity.

Accordingly, a proposal to amend Sebi's CIS norms was been approved to provide for a framework for regulation of all activities deemed to be CIS schemes. The changes also provide for additional requirements for continuous compliance by a registered CIS entities.

The ordinance also confers direct powers to Sebi Chairman to authorise an Investigating Authority or any other officer of Sebi to search any premises where incriminating documents are lying and seize such documents for investigation purpose.

The ordinance also empowers Sebi to make regulations for executing the search operations and to ensure safe custody of any books of account or other documents that are seized.

In this respect, the board approved Sebi (Procedure for Search and Seizure) Regulations, 2013, which is on the lines of the provisions in the Income Tax Act and provides detailed procedures for such search and seizures by the regulator.

The board also approved Sebi (Settlement of Administrative and Civil Proceedings) Regulations, 2013, which have been framed, keeping in view the provisions of the Ordinance and public comments received by Sebi in this regard.

The key features of this new regulation include a common substantive procedure for settlement of administrative and civil proceedings under all the securities laws, while it also formalises the already existing settlement process.

The new norms also provide for guiding factors for dealing with the settlement process, while serious offences such as insider trading are excluded from the scope of settlement.

In order to impart transparency in the process, the roles of the internal committee and high powered advisory committee are specifically defined, while the regulations also provide for terms of settlement in monetary as well as non-monetary terms or combination of both.

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