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Collective Investment Scheme: To ensure the investor’s interest and to control Ponzi schemes mushrooming all over India, one of the major amendments brought by the ordinance focuses on regulation of such schemes. As per this amendment, any pooling of funds under any scheme or an arrangement, which is not registered with SEBI and involves a corpus amount of One Hundred Crore Rupees or more shall be deemed to be a Collective Investment Scheme and as a consequence shall be barred from operation unless registered with SEBI. The same however is not applicable if the scheme/ arrangement is made or offered:
- By a cooperative society
- By a Non Banking Financial Companies
- Under a contract of Insurance
- Falls under the Employees Provident Fund and Miscellaneous Provisions Act, 1952
- By Companies without issuing an advertisement in prescribed form
- By a Nidhi Company or a Mutual Benefit Society
- By a Chit Business
- Under which contributions are made in the nature of subscription to a mutual fund.
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Cooperation with authorities having similar functions: An amendment has been made which has the effect of according SEBI a retrospective power since 6th March 1998 to call for information from or furnish information to other authorities, both Indian and Foreign that have functions similar to that of the Board. |
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This exchange of information however is limited to matters related to prevention or detection of violations in respect of Securities Laws and shall be undertaken in case of Foreign Authorities, only with the prior approval of the Central Government. |
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Powers with respect to search and seizure: Now, on Investigating Authority having reason to believe that a person or an enterprise being investigated has or will omit or fail to submit or destroy or alter any required information/ documents, the SEBI Chairman after being satisfied of the same, may authorize the Investigating Authority or any other officer of the Board to:
- Enter and search the building, place, vessel, vehicle or aircraft where the required information or documents are expected/ believed to be kept;
- Break open the lock of any receptacle and conduct the search if the keys are not available;
- Search any person who has got out of or is getting into or is in the building, place, vessel, vehicle or aircraft that has to be searched;
- Require person in possession or control of the required documents maintained in electronic form to provide the necessary facility to inspect such books of accounts;
- Seize any books of accounts or documents found as a result of search;
- Place marks of identification or make extracts or copies of the books of accounts or other documents;
- Record on oath the statement of any person who is found to be in possession or in control of the information or documents.
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| Apart from the amendments given above, certain amendments have been made which find place across all the three statutes being amended i.e. the SEBI Act, 1992, the SCRA, 1956 and the Depositories Act, 1996. The highlights of these amendments can be seen as follows: |
| 1. |
Power to direct disgorgement of amount: Through an amendment which adds an explanation in the respective statutes, it has been reinstated that SEBI has the power to direct any person to disgorge an amount equivalent to the wrongful gain made or loss averted by engaging in any transaction or activity in contravention of the provisions of the respective act. |
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By the virtue of an amendment in the SEBI Act, 1992, the disgorged amount shall be credited to the Investor Protection and Education Fund and utilized in accordance with regulations in this regard. |
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Settlement of Administrative & Civil Proceedings: An amendment has been made which brings clarity on the validity of Consent Orders and by which it shall now be explicitly stated under the law that any person, against whom any proceedings have been initiated under a certain sections, can file an application in writing to SEBI proposing a settlement of the proceedings initiated or to be initiated for alleged defaults. The application may be agreed by SEBI on payment of such sum by the defaulter or on such terms as may be determined under the Act. |
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However, it has been made clear that no appeal shall lie against such an order passed. |
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Establishment of Special Courts for Criminal Prosecution: For Speedy trial of criminal offences under the respective Acts, the Central Government may establish or designate Special Courts which shall consist of a single judge each, who shall be appointed by the Central Government. All such offences whether committed before or after the passing of this ordinance shall be eligible to be tried by such Special Courts. Any appeal against the order of such a Special Court shall lie with the High Court having jurisdiction over such Court. |
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Powers to the Recovery Officer: Now, if a person fails to pay any amount due to SEBI by the virtue of any order passed in its relation, i.e. penalty imposed by Adjudicating Officer, direction to refund money or a disgorgement order, the Recovery Officer shall be allowed to adopt any of the following means to recover the dues:
- Attachment & sale of person’s movable property;
- Attachment of the person’s bank accounts;
- Attachment & sale of the person’s immovable property;
- Arrest of the person and his detention in prison;
- Appointing a receiver for the management of the person’s movable and immovable properties.
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These amendments in Indian Securities Laws in spite of the Parliament not being in session not only show the grave circumstances that exist in the Indian Securities Market but also show that the Government places high importance on the protection of investors because it is their money the nation’s economy thrives on. |
