Mumbai: Markets regulator Sebi today said it has ordered recovery of over Rs 500 crore from defaulting/ erring companies ever since the new search and seizure order was implemented two months ago.
“In the past two months that the search and seizure order has been in place, we have passed orders to recover more than Rs 500 crore.
“We have frozen a whole number of bank accounts. Though I don't have the exact number of bank accounts frozen, a number of accounts and assets have been frozen worth over Rs 500 crore,” Sebi chairman UK Sinha told a capital markets summit organised by the Hyderabad-based Indian School of Business here.
It can be recalled that in a major upgrade of powers given to Sebi, the government had on July 22 this year allowed the regulator to pass orders like search & seizure, attachment of properties, arrest and detention of defaulters and pass disgorgement directions to recover the wrongful gains made in contravention of laws.
At the same time, the government had also allowed Sebi to seek information from other regulators within the country and abroad with retrospective effect, paving way to collect details pertaining to cases pending for over 15 years now.
In another retrospective change, which forms part of the Securities Laws Amendment Ordinance promulgated early July, individuals and companies being probed by Sebi could settle their pending investigations. Such settlements could be undertaken in cases that are currently pending for more than six years.
To tackle the growing menace of ponzi schemes being floated as collective investment schemes, the rules were also amended to classify any money collection of Rs 100 crore or more as CIS operation.
Sebi had also been given powers to crack down on illegal investment schemes floated by individuals as well, as against this being confined only to companies. However, all government-notified schemes would be out of the collective investment scheme framework.
The changes were part of as many as 22 amendments made by the government in three main Acts governing Sebi and its operations-the Sebi Act, the Securities Contracts Regulation Act and the Depositories Act- through a 16-page Ordinance.
Among others, Sebi had also been given powers to pass disgorgement orders for amount equivalent to wrongful gains or to losses averted by contravention of regulations.
On November 14, the markets watchdog had sought more teeth to its already revamped search & seizure power following the Sebi Ordinance.
The proposals included norms to exercise its powers to conduct search & seizure during investigations, while adopting necessary safeguards to protect the rights of persons subjected to such operations.
It has invited public comments till end of November for draft regulations, titled “Sebi (procedure for search and seizure) Regulations, 2013”.
In it, the regulator said detailed procedures need to be laid down “relating to the procedural safeguards during different stages of search and seizure and the rights of those persons subjected to search and the obligations of the authorised persons.”
Sebi said these regulations would help it “exercise the powers of search and seizure at the time of investigations, harmonious with the rights of the persons who are subjected to search of their person and property, while pursuing the Sebi's statutory mandate of investor protection.”
The new powers are aimed at making Sebi more effective in protecting investor interest and helping it to regulate the market better, including enforcement of securities laws.
The government promulgated the Securities Laws (Amendment) Second Ordinance on September 16 this year, conferring explicit powers on Sebi chairman to authorize investigating authority or any other officer of Sebi to conduct search and seizure under the Sebi Act.
The Ordinance also provides that Sebi may make regulations in relation to search and seizure. A corresponding provision has also been proposed to be inserted in the Sebi Act, enabling it to frame norms providing for the procedure to be followed for search or seizure.
Sebi has already proposed new regulations for settlement of administrative and civil proceedings, the powers for which were also granted through this Ordinance.
Sebi officials are now empowered to seek assistance of local administration to recover pending penalties. As on March 31, 2013, Sebi had to recover about Rs 120 crore from over 1,300 entities that defaulted on penalties.
While Sebi earlier had to go through a lengthy legal process to recover such penalties, it now has the powers to attach assets of defaulters and even order arrest.
