RECENT CHANGES IN SEBI ACT

Size: px

Start display at page:

Download "RECENT CHANGES IN SEBI ACT"

Harry Stafford
5 years ago
Views:

1 S.G.N RECENT CHANGES IN SEBI ACT PRESENTATION BY: CS ANUP KUMAR SHARMA VICE PRESIDENT VC CORPORATE ADVISORS PVT. LTD. (Category I) MERCHANT BANKERS

2 Presentation Plan Understanding the Securities Laws (Amendment) Ordinance, 2013 AComparativeanalysisofsituation underpreandpostordinance

3 Promulgated on July 18, Emphasis on Regulation of unregulated means of pooling of funds. Strengthen the hands of SEBI to deal with frauds and irregularities in securities market.

4 1) EMERGENCE OF COLLECTIVE INVESTMENT SCHEMES ( CIS ) SEBI Act, 1992, as originally enacted, empowered SEBI to only register and regulate CIS. However, there was no clarity as to what CIS meant as it was not defined. Later an amendment in the year 1999, a new section under regulation 11AA of the SEBI Act, 1992 was introduced to define CIS Schemes

5 What is a CIS AS PER 1999 AMMENDMENT?? Any scheme or arrangement made or offered by any Company under which-

6 PROBLEMS WITH THE EARLIER DEFINITION OF CIS Mushrooming of a variety of new and innovative ways of pooling funds outside regulatory jurisdiction There schemes did not exactly fit into the description of either CIS or any other regulated scheme like chit funds. (PONZI SCHEMES) The people behind such pooling have succeeded in keeping regulators at bay by claiming lack of regulatory jurisdiction and engaging in frivolous and dilatory litigation.

7 Inserted vide Securities Laws (Amendment) Ordinance, 2013 w.e.f Omitting the reference to Company in section 11AA(2) of the SEBI Act, 1992 with person. Deeming Provision- Any pooling of funds involving a corpus of at least Rs.100 crore and not regulated otherwise would constitute CIS. Ordinance empowers SEBI to bring any scheme or arrangement within the ambit of CIS. This provision would enable SEBI to deal with innovative schemes which as on date would not fall within the definition of CIS even under the amended Act.

8 2) PROVISION FOR CALL OF INFORMATION Prior to the Ordinance, SEBI s power to call for information was restricted to intermediaries and persons associated with the securities market or authorities constituted under any law in respect of any transaction in securities. Other organization like Telephone Companies & Others denied information desired by SEBI. The Ordinance has now armed SEBI to call for such crucial information from a person who may not be associated with the securities market.

9 3) CONVOLUTED POWERS OF SEBI TO CONDUCT SEARCH & SEIZURE Prior to this Ordinance, SEBI could conduct search and seizure only after approval from the Judicial Magistrate of the First Class. This delayed the proceedings especially when speed was of essence in any investigation. SEBI was not allowed to conduct search and seizure of a Company (non-intermediary) unless such Company indulged in insider trading or market manipulation. The power now conferred by the Ordinance would permits SEBI to conduct of search and seizure with the Authorization of the Chairman of the Board.

10 4) ESTABLISHMENT OF SPECIAL COURTS Prior to this Ordinance, no court inferior to that of a Court of Sessions shall try any offence under the SEBI Act. Large number of prosecutions became pending due to procedural complexities and shortage of judges / courts with necessary expertise in securities laws. After the Ordinance, the lawyers appointed by SEBI who have requisite experience and knowledge of the securities laws shall be deemed public prosecutors. The special Courts as provided under the Ordinance shall take cognizance and try all the prosecutions in securities laws, including prosecutions which are already filed and pending

11 5) ATTACH AND SELL MOVABLE AND IMMOVABLE PROPERTY Prior to this Ordinance, SEBI had no effective means to realize various penalties or dues. Penalties aggregating to Rs.120 Crs are yet to be realized. An amount aggregating about Rs.80 crore, which was to be disgorged by wrongdoers, has not yet been received by SEBI. Refund of monies raised from investors is estimated at Rs.3500 crore in respect of CIS only An estimated amount of Rs.60 crore is yet to be recovered from as fees from intermediaries

12 5) ATTACH AND SELL MOVABLE AND IMMOVABLE PROPERTY The power to freeze assets in was available only with regard to an asset forming part of a transaction only. Eg. Sahara's. The Ordinance empowers SEBI to attach and sell movable and immovable property of the defaulters without recourse to any Court of law, In addition, it has also been empowered to make a reference to Income Tax authorities for recovery of the penalty as tax dues under the Income Tax Act.

13 6) OTHER PROMINENT AMMENDMENT SEBI has been passing disgorgement orders and the same has been upheld by the Securities Appellate Tribunal as well as Supreme Court, an explicit provision in the Act now made by the Ordinance makes the position unambiguous Credit the disgorged amounts, which could not be distributed among the victims of the misdemeanor, to Consolidated Fund of India. SEBI is now empowered to credit all disgorged monies to its Investor Education and Protection Fund

14 THANK YOU Anup Kumar Sharma

SEBI Act, /17/2012. Copyrights CA Kamal Garg 1. Objects of the SEBI Act. Establishment of SEBI [Section 3] By: CA Kamal Garg

SEBI Act, /17/2012. Copyrights CA Kamal Garg 1. Objects of the SEBI Act. Establishment of SEBI [Section 3] By: CA Kamal Garg SEBI Act, 1992 By: CA Kamal Garg Objects of the SEBI Act 1. Protection of the interests of investors; 2. Promoting orderly and healthy growth of the securities market; 3. Regulation of the securities market