Ponzi schemes: SEBI gets powers to authorize search and seizures

The government has conferred the Securities and Exchange Board of India (SEBI) with powers to authorise search and seizure operations, in a bid to give more teeth to the capital market regulator to crack down on the so-called `Ponzi schemes'.

The President of India today promulgated an ordinance to amend the Securities Laws as decided by the union cabinet at its meeting on 17 July 2013.

SEBI would now have powers to regulate any pooling of funds under an investment contract involving a corpus of Rs100 crore or more and attach assets in case of non-compliance.

The ordinance empowers SEBI chairman to authorize the carrying out of search and seizure operations.

The union cabinet at its meeting, held on 17 July 2013, decided to amend the Securities and Exchange Board of India (SEBI) Act and related Acts for providing more powers to the capital market regulator to proceed against illegal collective investment schemes and to curb insider trading.

Regulation has been lagging in the wake of new and innovative methods of raising funds from investors, such as art funds, time-share funds, EMU /goat farming schemes. At the same time, there has also been an overlap regarding types of instruments / fund raising.

SEBI has been receiving complaints against unapproved fund raising activities of certain companies that claim that they do not come under the purview of SEBI Collective Investment Scheme regulations.

With the amendments in force now, SEBI would have powers to regulate any pooling of funds under an investment contract involving a corpus of Rs100 crore or more, authorise search and seizure operations and attach assets in case of non-compliance.

Besides, SEBI would have powers to seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being investigated by it.

The ordinance also enables SEBI to establish special courts in order to fast-track the resolution of pending SEBI related cases.

The amendments to the SEBI Act, SCR Act and the Depositories Act were finalised after detailed consultations with SEBI and other ministries and departments, including ministry of home affairs, Department of Telecommunications, ministry of corporate affairs, Department of Financial Services etc, an official release said.