[aaykarbhavan] Business standard news updates 20-8-2013

Sebi working on norms to incorporate new powers

SAMIE MODAK Mumbai, 19 August The market regulator, Securities and Exchange Board of India ( Sebi), is framing new regulations and operational framework to start exercising the powers that it has been newly bestowed with. A team at Sebi is said to be working on at least two new set of regulations that will enable it to conduct search and seizure operations and recover money through disgorgement, sources said. Disgorgement is to repay ill- gotten gains to those affected. Also, new systems are being put in place for early detection and crackdown of collective investment schemes ( CIS). The Sebi board, which met afortnight back, deliberated on the ordinance promulgated on July 18 and discussed the follow- up action that needs to be taken on its part. The Centre has provided Sebi with more teeth to effectively act against violators by conducting search and seizure operations and to recover dues from them by attachment and sale of assets. Sebi has now been allowed to access information and records of any person, including abank, where it feels it's relevant for any investigation with respect to a transaction related to the securities market. It also has been allowed to enter and search for documents in any building, vessel or aircraft or break open a lock. In cases where a person fails to pay the penalty imposed by Sebi or fails to comply with the disgorgement order, Sebi can now recover dues by attachment or sale of immovable or movable property, bank accounts or even detain the person. Earlier, the market regulator had to conduct search and seizure operations with the approval of a magistrate. Sebi, which didnt have the incometax department like powers, had to depend on courts to impound assets. There have been instances where shares were lying in the demat account of the defaulter, but Sebi hasnt been able to sell them to recover dues. The regulator is to recover penalties totaling ₹ 125 crore from violators against whom it has already passed orders. Experts said regulations on disgorgement will be critical, especially how Sebis decides to compensate those affected by any fraud or violation of securities law. "What will be important is how the new powers will be used from an investors perspective. Sebi will have to state how the disgorgement money will be utilised or how investors who have lost money will be compensated," said M S Sahoo, secretary, Institute of Company Secretaries of India ( ICSI). Sebi is said to be working on the operational framework and the processes that need to be followed by its officials to ensure that the powers are not misused by them. "Sebi will have to specify steps to conduct search and seizure operations to avoid misuse. You should have a reasonable process when you are searching someones premises. Without that, it will be like headless chicken," said J N Gupta, founder and chairman, Stakeholders Empowerment Services, a proxy advisory firm. Other areas where Sebi could announce changes in the depository regulations, consent regulations, which have now been given legal sanity and also on establishment of new courts for providing speedy trial of offences. FRAMING NEW REGULATIONS |A team at Sebi is working on two new set of regulations that will enable it to conduct search and seizure operations and recover money through disgorgement |New systems are being put in place for early detection and crackdown of collective investment schemes |Earlier, Sebi had to conduct search and seizure operations with the approval of a magistrate

 

SAT calls for final filings in Fresenius Kabi- Sebi case BS REPORTER Mumbai, 19 August The Securities Appellate Tribunal ( SAT) heard appeals by Fresenius Kabi Oncology Ltd on its delisting bid on Monday. The market regulator Securities and Exchange Board of India ( Sebi) had passed an order on July 22 against Fresenius Kabi Oncology, which required the firm to increase its holdings by an additional five per cent to delist the company. The tribunal has heard the final arguments and asked for submissions from both the parties. The judgement will be passed after these are made. Sebi had taken note of investor complaints that entities that purchased shares in an offer for sale ( OFS) might have done so to ease the delisting process. "Sebi has received complaints from investors alleging, inter alia, that the entities who had purchased shares in the aforesaid OFS might have participated in the OFS with an intent to subsequently tender their shares at an artificial price in the bids for the delisting offer, which will be determined in collusion with the promoters of the company, and thus enable the company to successfully complete the delisting offer," said the Sebi order. Senior advocate Janak Dwarkadas who represented Fresenius Kabi Oncology argued that the Sebi order, which increased the threshold for delisting, is untenable. He argued that increasing the threshold is a legislative act, which is being attempted through a quasijudicial order. He added Sebi has limited role to play in delisting, since it is the stock exchanges which give permission for the same. Shiraz Rustomjee, senior advocate representing Sebi, pointed out that the threshold would have been higher had it not been for the OFS, and the Sebi order merely states that the pre- OFS threshold would need to be adhered to. He also pointed out that six out the 32- 34 entities that were part of the OFS accounted for over 90 per cent of the shares sold. He said Sebi had not taken aformal decision to investigate the entities to examine if there were irregularities involved, on being asked about the same by the tribunal. The tribunal asked for brief submissions from both the parties on the points to be considered. A judgment is expected to be passed soon, according to those handling the matter. Also appealing against the regulator was Osians Connoisseurs of Art, which became the first art fund to be categorised as a collective investment scheme ( CIS) by the Sebi order dated April 15 this year. The fund had collected money from 656 investors for the purpose of buying art work. It had managed to mop up ₹ 102.4 crore. The hearing for Osians has been adjourned to September 19. JUDGEMENT SOON |Fresenius Kabi Oncology argued that the Sebi order to increase the delisting threshold is a legislative act attempted through a quasi- judicial order |It argued that Sebi had limited role to play in delisting, since it was the exchanges that give permission for this |Sebi said the order said the pre- OFS threshold would need to be adhered to and no new threshhold was dictated |Six entities accounted for over 90% of shares sold in OFS, though Sebi has not taken a formal decision to investigate the matter |SAT calls for final submissions, judgement to be passed soon |Osians Art fund hearing adjourned till September 19 "Sebi has got complaints from investors alleging, among others, that the entities who had bought shares in the Fresenius OFS might have participated in it to tender shares at an artificial price in the bids for the delisting offer" Sebi In an order

 

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CS A  RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai

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