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We can fast-track prosecution now, Sebi warns offenders

These additional powers, as also setting-up of a special Sebi court, would ensure that fraudsters do not go scot-free and the regulator is be able to initiate recovery proceedings against them and even conduct search and seizure operations at defaulters' premises, Sebi chief U K Sinha said.

There should be a sea-change from the earlier occasions when offenders would tend to ‘ignore orders from Sebi’ and the legal cases would drag on for years without recovery of any money, Sinha said in an interview. ‘The cases have gone for 10-15 years and there no money has been recovered. So except for a little bit of 'naming and shaming' for individual or a company, it did not have much impact on them,’ he said.

After clearance from Parliament earlier this month, the government has notified the Securities Laws Amendments Act, which empowers capital markets watchdog Sebi to take action against all unregulated money-pooling schemes involving Rs 100 crore or more. The new Act gives Sebi authority to pass orders for attachment of properties, arrest and detaining of defaulters in prison and for disgorgement of ill-gotten money.

It also gives Sebi access to call data records, or any other information from any entity during investigations, while it can now conduct search and seizure operations after permission from a special Sebi Court to be set up soon.

‘The new Act clearly defines what can be a Collective Investment Scheme and therefore falls under Sebi jurisdiction. This would make it very difficult for operators of such schemes to circumvent the regulations,’ Sinha said. The recovery and disgorgement powers would help in facilitating refund of money to investors, he added.

Sinha said that the special court should be set up soon as a process in this regard has already been initiated and the regulator has taken up the matter with the government and the Mumbai High Court.  
The new powers have been given against the backdrop of a large number of illicit money-pooling schemes, involving funds worth thousands of crores, coming to fore in past couple of years, including Saradha and other scams in West Bengal.

The Securities and Exchange Board of India was given temporary powers in July 2013 through an ordinance, which was promulgated thrice before lapsing last month. ‘Sebi is a creature of Parliament. Like many other parts of the world, in India also, regulatory action has originated after a crisis. Unfortunately, this has been a trend not only in India but almost all parts of the world,’ Sinha said.
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