Proposed changes will strengthen Sebi to deal with ponzi schemes: Jaitley

New Delhi: The proposed changes in securities market laws will further strengthen SEBI to deal with ponzi schemes while providing safeguards to ensure the powers are not misused, Finance Minister Arun Jaitley said today.

Initiating a discussion on Securities Laws (Amendment) Bill, 2014, Jaitley said changes in securities market as well as in the nature of “aberrations” have necessitated the need for changing the rules.

Under the new bill, the Securities and Exchange Board of India (SEBI) would require permission from a designated court in Mumbai for carrying out search and seizure operations related to investigations.

“Secrecy is the essence of any surprise element during a search… I have worked out that instead of having to go to entire country for a permission, a particular court is being created in Mumbai where the headquarter of SEBI is.

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“If they want to search any premises, they will go to that designated court, place documents and take permission of court before they can conduct the search,” Jaitley said.

The original Act has a provision that SEBI could conduct search operations after seeking permission of the Magistrate of the area. Former Finance Minister P Chidambaram had then changed the provision allowing SEBI to conduct search operation without any permission in the ordinance.

“After his (Magistrate) permission they would conduct the search as a result of which the whole issue will become public and the purpose of the search itself would be defeated,” Jaitley said.

The bill, introduced in the Lok Sabha yesterday, aims to empower capital market watchdog (SEBI) giving powers such as to crackdown on fraudulent investment schemes, seek information from any entity related to a probe authority and to seek call data records.

The Finance Minister said over the last decade the nature of security market has changed and, therefore, the nature of violations too have changed and power of regulators too need to be re-defined. “… So the act needs to be amended. There are some changes in the Act which also made it relevant that whatever documents are necessary in the interest of regulation would be acquired,” he said.

An ordinance to empower SEBI to deal with ponzi schemes was promulgated thrice during the previous UPA regime but the same could not be passed by Parliament to make it an Act.

Once the bill becomes an Act, SEBI would have powers to call for information “not only from the people or entities associated with the securities market but also from persons who are not directly associated with the securities market”.

Besides, the capital market watchdog would get increased powers to crack the whip on illegal investment schemes. The bill aims to protect investors as well as curb fraudulent investment schemes thriving at the expense of gullible investors.

“Further, in view of large pendency of cases, it is necessary to constitute Special Courts for prosecution of offences under the securities law to provide speedy trial,” the bill said. As per the bill, any unregistered scheme having a corpus of Rs 100 crore or more would be deemed as a collective
investment scheme.

Participating in the discussion, former Corporate Affairs Minister M Veerappa Moily (Congress) said while the proposed amendments to Securities Act were essential for the time being, there was a need to bring a “comprehensive” bill in the near future.

He said the new comprehensive legislation should be on the lines of the Companies Act the UPA government had brought after much deliberations.

PTI