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CS A RENGARAJAN
Sebi beefing up search, seizure ops
SAMIE MODAK
Mumbai, 31 October
Armed with fresh powers to conduct search and seizure operations and
attach properties and bank accounts, the Securities and Exchange Board
of India (Sebi) is going all out to use these effectively.
For this, Sebi officials would undergo training from officials at the
income tax (I-T) department. "As we don't have much experience in
handling some of the new functions, we have asked the I-T department
to impart training to our officials," said a senior Sebi official.
For attachment of properties, the regulator has also appointed a
recovery officer and formed a separate division to carry out recovery
proceedings.
Sources said Sebi had set up two new teams — search & seizure within
the enforcement division, and a recovery division under the legal
department — responsible for carrying out the new functions. Though
the exact number of officials working in these departments isn't
known, the regulator intends to gradually beef up these teams.
In July, President Pranab Mukherjee had promulgated an Ordinance that
gave Sebi these powers. The ordinance has granted Sebi the powers to
seek information from any individual (who might or might not be
connected with markets) for carrying out investigation. But the final
authority on the execution of these powers lies with the Sebi
chairman. An officer for search and seizure needs the approval of the
chairman, who can allow such an operation only when necessary.
The government has now authorised Sebi to, during the course of such
operations, enter and search any building, vessel or aircraft, break
open alock or door, search any suspicious person and record statement
under oath, as well as seizure documents.
So far, Sebi has issued notices for attachment of the bank accounts of
various entities in four different cases, including the Pyramid
Saimira and MPS Greenery ones. A Sebi official said the board might
start conducting more search and seizure operations after proper
training.
Earlier, Sebi could only pass orders or ban entities from accessing
capital markets, but couldn't do much to recover dues. Now, it can
directly issue directions to banks to freeze the accounts of
defaulters or attach and sell properties. For this, a Sebi recovery
officer has to issue a signed certificate in a prescribed format,
specifying the amount due from the entity whose assets are to be
attached.
Now, Sebi is planning to pursue cases in which it had earlier passed
an order, but wasn't able to recover the penalties. It hopes the
Ordinance is passed and becomes an Act.
To a large extent, the new powers have brought Sebi on a par with
other foreign securities regulator, including the US Securities and
Exchange Commission (SEC), which can ask defaulters to pay
disgorgement to repay ill-gotten gains to investors. Sebi's global
counterparts have effectively used disgorgement powers to recover
dues.
However, powers to wiretap, a function critical in prosecution,
especially in insider trading cases, haven't been granted to Sebi yet.
Unlike SEC, Sebi isn't given access to phone call recordings. It can,
however, seek call data records.
Appoints recovery officer, forms separate division for recovery
proceedings; income tax dept to provide training ARMED & READY
|Sebi has already issued bank attachment notices against various
entities |The regulator plans to go after more violators for
recovering unpaid dues |It is hopeful the Ordinance will become an Act
|Ordinance has provided Sebi powers on a par with those of global
peers |However, unlike the US SEC, the regulator lacks access to wire
taps
--
CS A Rengarajan
9381011200
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