Sebi wields powers with over 700 orders, 17,00 recovery cases

Sebi wields powers with over 700 orders, 17,00 recovery cases

From giants like Reliance Industries and DLF to little-known entities selling jatropha plants as money-multiplier investments, all faced the music in 2014 when an empowered Sebi took them to task for manipulating markets, defrauding investors or hiding market-sensitive information.

Sebi passed at least 763 orders against various entities, issued more than 1,700 attachment orders, and also detained three persons while sending one to prison this year.

The Securities and Exchange Board of India (Sebi) also ordered refund of investors' money amounting to an estimated Rs 1 lakh crore, which it found had been raised from the public through illicit schemes -- many of them being ponzi structures -- launched across the country by nearly 100 firms.

The markets watchdog, which was given greater powers by the government this year to take on manipulators and defaulters, in the process sent across a loud and clear message that it was keeping a close watch on the markets and any attempt to manipulate or defraud investors would attract immediate action.

Giving a long rope to the entities found to have indulged in lesser-sensitive cases, the regulator also agreed to settlement offers of nearly 40 entities, but an equal number of consent pleas were rejected too as charges were serious in nature against those entities.

The regulator used its new power for recovery of unpaid dues -- penalty and disgorgement imposed by it, fees due to the regulator and money directed to be refunded to the investors. It got powers to attach and sell the properties including bank/demat accounts, arrest and imprisonment of defaulters.

Using these powers, Sebi issued more than 1700 attachment orders in more than 500 cases. In more than 100 cases, entire dues with interest were recovered by Sebi and the attachments made therein were lifted.

An amount of Rs 25 crores was collected by exercising the recovery power, while Sebi also detained three defaulters and sent one to civil imprisonment for six months.

In another major development, Sebi initiated action against individuals and companies misusing the stock markets for tax evasion and money laundering. It has already passed orders against 260 entities and more may follow in this case.

Among the major cases, Sebi imposed a penalty on corporate behemoth Reliance Industries, barred realty giant DLF and its top executives from the markets for three years, completed its probe into the Satyam scam while barring five perpetrators for 14 years and asked them to return nearly Rs 1,900 crore.

Other major entities that faced Sebi action included PACL, Gillette India, Rose Valley, six high profile merchant bankers (Kotak, Edelweiss, IDBI, DSP Merrill Lynch, ICICI Securities and SBI Caps), GlaxoSmithKline, Apollo Tyres and FTIL, while two major stock exchanges NSE and BSE were also censured by the regulator.

Besides taking enforcement actions and expanding its surveillance activities, Sebi initiated a number of steps for development of markets and for investor protection.

The year 2014 started with new regulations for Foreign Portfolio Investors, making it easier for overseas entities to invest in the Indian markets. Sebi also unveiled a host of reforms for empowering the small investors and new corporate governance norms were introduced, as the regulator moved towards 'principle-based regulations'.

The corporate governance norms were aligned with the new Companies Act, while envisaging an increased role for independent directors and to empower minority shareholders.

The appreciation came in the form of a World Bank ranking, where India was ranked seventh best in the world among 189 countries for protection of minority investors, as against 34th position last year.

Sebi Chairman U K Sinha was also bestowed with 'business reformer of the year' award this year.

A long term policy for mutual funds was also unveiled by Sebi for increasing the penetration of these financial products to areas not covered hitherto. The cash investment limit was increased to Rs 50,000 in a year, helping small investors to look at MFs as a preferred investment option.

The regulator took a number of investor-friendly measures like single KYC for all investments in the securities markets. The centralised KYC system, introduced by Sebi, is now being adopted by other financial sectors also and already has more than 1.95 crore KYCs of investors.

Under the new system, anyone who as done KYC with any Sebi registered intermediary need not undergo the same process again when he approaches another intermediary. Sebi has also decided to share KYC information with entities regulated by other financial sector regulators such as RBI and IRDA.

In order to make the regulatory requirements consistent across the companies, Sebi undertook key reforms in the IPO space as well. Besides, it expanded the framework of Offer for Sale of shares through stock exchanges to top-200 companies, as against 100 earlier. A minimum of 10 per cent of the shares need to be reserved for retail investors.
Sebi also convinced the government to extend the minimum 25 per cent public shareholding norms to PSUs as well.

It was not the investors alone who had something to cheer about, as Sebi also made the life easier for brokers and depository participants. The DPs now need only a single registration for operating with both the depositories (NSDL and CDSL), while Sebi has also approved a single registration for stock brokers and clearing members for operating across all the stock exchanges and clearing corporations.

Sebi has also approved changes to Delisting Regulations by reducing the timelines from 137 calendar days to 76 working days for the delisting process. Delisting would require nod from at least 25 per cent of the number of public investors.

The new insider trading norms, which have been approved by the Sebi board, have widened the definition of insider, while the norms have been aligned with the global standards.

The new regulations for REIT and InVITs - business trusts for real estate and infrastructure sectors - are expected to bring in greater investments for these two key segments of the economy.

To enhance transparency and safeguard investor interest, Sebi also notified Research Analyst regulations.

The year also saw exit of five non-functional regional exchanges.
The key message which Sebi tried to give this year was that the regulator is closely watching the markets and any attempt to manipulate them will be identified quickly and immediate action would follow.

This was evident when Sebi recently barred more than 260 entities from securities markets in a suspected case of money laundering and tax evasion, wherein securities laws have also been violated.

The year also saw many securities markets regulation violators facing the ire of the regulator. Orders were passed against 35 entities for carrying out unregistered CIS (Collective Investment Scheme) activities. Orders were also passed against 58 entities for raising money without necessary regulatory approval through deemed public issues.

While passing these orders, Sebi also enhanced its investor awareness activities through multi-media programmes while cautioning investors against ponzi schemes.

Following amendments to the Sebi Act, the regulator has been given greater powers like search and seizure and they helped it enhance its enforcement actions this year.

Sebi used these powers to seize documents in various cases especially those against unregistered CIS activities.

The regulator also passed many orders against listed companies for non-redressal of investor grievances, including by imposing monetary penalties.

Among more than 750 orders passed by Sebi this year, close to 300 were by its Whole-Time Members and over 450 were by adjudicating officers.

Sebi also strengthened its surveillance mechanism, while it began taking 'soft actions' like warning or observation letters in insignificant cases.

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