New powers very helpful; special court being set up:Sebi chief

Published Dec 15, 2013, 8:23 pm IST
Updated Mar 19, 2019, 12:14 am IST
New powers helpful to prosecute culprits and recover money from fraudsters: Sebi Chief.

Mumbai: Armed with new powers to act against fraudsters and market manipulators, Sebi Chairman U K Sinha says the regulator has already begun utilising them in a big way and a process has been initiated to set up a special court to hear Sebi-related matters for faster prosecution.

New powers have made it easier for the Securities and Exchange Board of India (SEBI) to prosecute culprits, recover money from fraudsters and erring companies, as also facilitate a faster refund of investors' hard-earned money, Sinha said, while adding that sufficient safeguards have been incorporated to check any abuse or misuse of these powers.


"My worry is that the Ordinance through which we have got these powers should be soon converted into an Act of Parliament, as we have already begun utilising them and have taken actions based on these powers," Sinha told PTI in an interview here.

Amid a large number of cases where investors were being defrauded of their hard-earned money by fraudulent schemes, Sebi was earlier this year granted greater powers through an Ordinance, which has been already promulgated twice by the government. The Ordinance needs to be replaced by an Act, for which the Securities Laws Amendment Bill is pending before Parliament.


The Parliamentary Standing Committee needs to give its report on the Bill before it can be taken up for its passage. Finance Minister P Chidambaram yesterday had said the government would have to take the unprecedented move of promulgating the Ordinance for the third time if the panel did not submit its report and the Bill was not passed before the end of current Parliament session.

The Sebi chief said the new powers have been "very helpful" and the regulator has already begun utilising them in a big way within a few months of being armed with them in August. 


"We have already utilised these powers and my worry is that this should become an Act of Parliament very soon, because twice the Ordinance has already been promulgated.... "Many of the actions we have already taken (based on these powers), we would be at a very major disadvantage and what will we do if it does not become an Act," Sinha said.

He also said sufficient safeguards have been put in place against any misuse of the new powers and all the genuine "questions and worries" about any abuse of these powers have been addressed.

There have been many major changes in the capital markets segment in the recent months and Sebi has taken a number of actions against erring companies, including against those having fraudulently raised money from investors.


At the same time, there have been instances where investors have not been able to get back their hard earned money despite Sebi action against the erring companies, as the matter got later stuck in various legal issues and judicial processes.

Asked about such cases, including the likes of Sahara and Saradha matters, and the way out for enabling speedier refund to investors, Sinha said the Ordinance on amendments to securities laws of the country is very significant in this regard, but did not comment on any individual cases.

"In matters like investigating insider trading, there was a limitation that Sebi could call for information from entities who are connected with the market, and not from any general public. On the other hand, CBI, Income Tax Department and some other enforcement agencies could call for information from anybody.


"What this Ordinance does, we can call for information from anybody and all the information is now available to us. For example call data records is now available to us and that would make it easier for us to prove cases of insider trading, market manipulation etc," he said. 

Asked about cooperation from banks, telecom companies and other entities on sharing of information based on these new powers, Sinha said they are cooperating very well.

On how the new powers can help it facilitate faster refund to investors from fraudulent schemes, Sinha said: "In cases where money is not coming, this Ordinance also gives us two extra powers.


"First, Sebi won't have to go to a civil court for recovery. Now, we have the recovery officers who will recover the money from such companies directly. Like income tax department and debt recovery tribunal, we can recover ourselves and this is a major improvement that has taken place.

"Then, in matters where we have passed the orders and the people are refusing to pay, we now have powers to go to a special court."

Sinha said the process for setting up this special court has begun and the matter has already been taken up by Sebi with the government and the high courts.


In Mumbai, the sessions judge has agreed to earmark a judge to hear Sebi-related matters, he said, this would help in making the prosecution process much faster and easier.

"The powers to recover and prosecute have become much stronger and these additional powers are very important and would help in matters like collective investment schemes," Sinha said.

On investors not being compensated in time, Sinha said, "There was no clarity in the erstwhile Sebi Act on whether we can collect money for what is known as disgorgement. This Ordinance also gives us powers for disgorgement and that is also possible now."


"People will always go and seek legal remedies. Whatever is legally permissible, every accused and offender has the rights to explore those options. Still, our hands have been strengthened and instead of waiting for other agencies on whom we did not have any control, we can move on our own in matters like recovery, prosecution and disgorgement with out additional powers," Sinha said.

"Even after these powers, people can certainly go to the high courts and the Supreme Court as they have legal rights to appeal. No Act of Parliament can stop anyone from going to the courts. But for us, things would become easier. We have cases of prosecution which have been going on for more than 15 years and that should not happen now," he added.