Sahara link behind Samajwadi Party's opposition to Sebi bill?

With an aim to provide stronger powers to Sebi for taking on perpetrators of ponzi schemes and other fraudulent activities, the government has proposed to amend the Sebi Act and arm the market watchdog with direct powers to carry out search and seizure operations and attach assets.

Sebi will also get powers to seek information, such as telephone call data records, from persons or entities being probed for suspect securities transactions.

However,the Samajwadi Party has opposed amendment. _The Indian Express_today quoted SP’s Rajya Sabha member Naresh Agrawal as saying, “Theamendment envisages granting powers to SEBI to arrest anybody at will. It amounts to vesting it with powers of a daroga… SEBI has so far not been able to unearth ponzi schemes. This does not appear to be the best way to crack down on ponzi schemes."

[caption id=“attachment_1046725” align=“alignleft” width=“380”] In the high-profile Sahara case, Sebi had passed the attachment orders on the directions of the Supreme Court and even in various other cases the penalties imposed by the regulator have remained unpaid.
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The IE report also says that the party’s opposition to the amendment could be because it will allow the Sebi to proceed more stringently against the Sahara group firms which are currently embroiled in a court battle with the market regulator over the latter’s jurisdiction.

As of now, the Sebi can regulate only listed companies. The amendment will allow it to regulate unlisted companies too, which will bring Sahara Real Estate Corporation and Sahara Home Finance Corporation,the two Sahara companies that allegedly raised about Rs 17000 crore through illegal optionally fully convertible debentures.

Agrawal, however, has denied any such link to the Sahara group, the report says.(Read the entireIndian Express report here)

The amendment will empower Sebi to deal with all kinds of investment schemes involving pooling of funds totalling Rs 100 crore or more,by any entity, listed or unlisted.

Also, any investment scheme floated by a ‘person’ and not only a ‘company’, has been proposed to be brought under Sebi’s jurisdiction for Collective Investment Schemes (CIS) activities.

Besides, the government has also proposed to provide Sebi with direct powers to conduct search and seizure with authorisation from its Chairman.

In cases where Sebi passes orders for refund of money raised fraudulently from investors, concerns have been there with regard to the enforcement of such directions since the regulator does not have any direct powers to attach movable or immovable properties.

The existing powers to freeze assets is available only with regard to an asset forming part of a transaction and it does not provide for a measure to provide remedy to investors from any other assets.

In the high-profile Sahara case, Sebi had passed the attachment orders on the directions of the Supreme Court and even in various other cases the penalties imposed by the regulator have remained unpaid.

Accordingly, Sebi had sought explicit powers to attach and sell movable and immovable properties of defaulters without recourse to any court of law, in pursuance of any order passed by it, or to recover fees and other regulatory charges due from various entities or the outstanding penalties.

The recent developments involving an alleged defrauding of lakhs of investors by West Bengal-based Saradha group and other entities in the state have further underscored the need to change the regulations to give greater powers to Sebi.

With inputs from PTI