|
Recently The Securities Law (Amendment) Act, 2014 has been enacted and notified thereby bringing amendments in the SEBI Act, SCR Act and the Depositories Act.
The Ordinance bringing amendments in the Securities Laws was first introduced on 18th July, 2013 wherein significant changes were made in all the three Acts. The major amendments so made widened the role and powers of the SEBI Board as listed herein below:
- Widening the ambit of Collective Investment Scheme by modifying its definition;
- Enhancing Cooperation with authorities having similar functions;
- Providing powers with respect to search and seizure;
- Vesting power in Board for direct disgorgement of amount;
- Introducing provisions of Settlement of Administrative & Civil Proceedings;
- Establishing Special Courts for Criminal Prosecution;
- Facilitating wider powers to the Recovery Officer.
Vide Securities Law (Amendment) Act, 2014 apart from incorporating the amendments proposed by the original Ordinance as above, few additional important amendments have been brought in the three Acts. The Amendments so brought have also made the penal provisions under the Acts all the more stringent. The amendments in all the three Acts are concisely expounded hereunder:
SEBI Act, 1992
- In addition to the existing maximum penalty and penalty for continuing default (if any), minimum penalty of Rs. One lakh has been prescribed, for-
- Failure to furnish information, return, etc. [Section 15A]
- Failure by any person to enter into agreement with clients.[Section 15B]
- Failure to redress investors’ grievances. [Section 15C]
- Defaults in case of mutual funds and collective investment schemes. [Section 15D]
- Failure to observe rules and regulations by an asset management company. [Section 15E]
- Default in case of stock broker. [Section 15F]
- Contravention where no separate penalty has been provided. [Section 15HB]
- Further a minimum penalty of Rs. Ten lakh has been prescribed, for-
- Insider trading. [Section 15G]
- Non disclosure of acquisition of shares and takeovers. [Section 15H]
- A minimum penalty of Rs. Five Lakh has been prescribed, for-
- Fraudulent and unfair trade practices. [Section 15HA]
- the board is also now authorized to examine record(s) of any proceedings and to enhance the amount of penalty levied by the erroneous order of adjudicating officer. [Section 15-I]
- Also the authorized officer of the board is now empowered to request for the services of police officer or any officer of Central Government, or of both, to assist him in the process of investigation and search & seizure [Section 11C].
In Securities Contracts (Regulation) Act, 1956
- In addition to the existing quantum of maximum penalty and penalty for continuing default (if any), minimum penalty of Rs. One lakh has been prescribed, for-
- Failure to furnish information, return, etc. [Section 23A]
- Failure by any person to enter into agreement with clients.[Section 23B]
- Failure to redress investors’ grievances. [Section 23C]
- Contravention where no separate penalty has been provided. [Section 23H]
- Failure to segregate securities or moneys of client or clients. [Section 23D]
- Further a minimum penalty of Rs. Five lakh has been prescribed, for-
- Excess dematerialization or delivery of unlisted securities. [Section23F]
- Failure to furnish periodical returns, etc. [Section23G]
- Likewise to SEBI Act, the board is authorized to examine records of any proceedings and enhance the amount of penalty levied by the erroneous order of adjudicating officer. [Section 23-I]
- Section 23L (1) of the SCRA, 1956 has been modified and words “or sub-section (3) of section 23-I†has been added which demonstrates that an appeal may lie to Securities Appellate Tribunal for a decision or order made u/s 23-I (3).
In Depositories Act, 1996
- In addition to the existing quantum of maximum penalty and penalty for continuing default (if any), minimum fine of Rs. One lakh has been prescribed, for-
- Failure to furnish information, return, etc. [Section 19A]
- Failure by any person to enter into agreement with clients.[Section 19B]
- Failure to redress investors’ grievances. [Section 19C]
- Delay in dematerialization or issue of certificate of securities. [Section 19D]
- Failure to reconcile records. [Section 19E]
- Failure to comply with directions issued by Board under section 19 of the Act. [Section 19F]
- Contravention where no separate penalty has been provided. [Section 19G]
- Further explanation has been added to the section 19 of the Depositories Act, 1996 demonstrating that power of board to issue direction includes and has always deemed to have been included the power to order disgorgement of money.
|
CP Comments:
Through the Amendment Act, the SEBI has been empowered and provided with much needed ammunition to catch hold of the wrongdoer in the Capital Market. The regulator can now carry out its investigation in an expeditious manner by exercising search and seizure operations with permission of a magistrate or judge of a court in Mumbai. SEBI now also possess powers to call records from “any person†to facilitate speedy investigations. The scope of Collective Investment Scheme have been broaden and again powers have been vested with SEBI to define pool of funds to fall under CIS ambit. The provision of minimum penalties is again an indication of tightening of reigns and tougher regulator regime.
Vested with the wider powers, SEBI has already started acting swiftly and as much as 1500 recovery cases have already been filed since July 2013. Moreover to provide detailed framework on the powers so vested several new Regulations have been formulated by SEBI in the recent past and few existing ones modified which includes the following:
- SEBI (Procedure for Search and Seizure) Regulations, 2014 on Jan 10, 2014.
- SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014.
- SEBI (Investor Protection and Education fund) (Amendment) Regulations, 2014;
- SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014
|
