Amended SEBI bill devoid of search and seizure provisions

The Securities Laws (Amendment) Bill 2014, introduced in the Lok Sabha on Monday, makes provision for empowering SEBI to initiate action against unregulated deposit taking and Ponzi schemes and authorises the market regulator to call for relevant information and records from any person among others.

But the amended bill has diluted the 'search and seizure' power of SEBI in securities-related offences. This power, initially in the hands of the SEBI chairman, has now been passed on to a designated court in Mumbai.

The provision, which is part of the new Securities Laws (Amendment) Bill tabled in the Lok Sabha, was diluted following criticism that 'sweeping powers' had been given to SEBI for search and seizure operations.

The cabinet had, at its meeting on 24 July 2014, given its approval to the Securities Laws (Amendment) Bill 2014 for its introduction in the current session of the Parliament.

The bill provides that any pooling of funds in any unregistered scheme or arrangement, having corpus of Rs100 crore or more, shall be deemed to be a collective investment scheme. There is a provision for disgorgement of illegal funds.

It also provides for express powers to SEBI for the settlement (compounding), establishing of special courts, recovery of amounts and to enhance the penalty imposed by an adjudicating officer.

Section 15A-HB of the SEBI Act prescribes penalties to be imposed for various offences. However, these sections only provide one level of penalty with no minimum level or range and without giving any discretion to the adjudicating officers. Amendment to these sections are included in the Securities Laws (Amendment) Bill 2014 by prescribing minimum penalty to be imposed for each violation in the Securities Laws (Amendment) Bill 2014, in addition to the amendments included in the earlier odinance.

Government had promulgated the Securities Laws (Amendment) Ordinance, 2013 on 18 July 2013 to empower SEBI to initiate action against the large number of cases reported from all over the country of unregulated deposit taking and ponzi schemes. Subsequently, the Securities Laws (Amendment) Bill 2013 was introduced in the Lok Sabha on the 12 August 2013 to amend the SEBI Act 1992 and corresponding changes under Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. As the First Ordinance would have lapsed, the Securities Laws (Amendment) Second Ordinance, 2013 was promulgated on the 16 September 2013. The second ordinance ceased to operate on 16 January 2014. The Securities Laws (Amendment) Ordinance, 2014 was promulgated on 28 March 2014. The said Ordinance lapsed on 18 July 2014.