Ministries agree to let Sebi search & seize

NEW DELHI: The Finance and Law ministries have agreed to meet mid-way and clear the air on some contentious clauses of the proposed Sebi Act, which seeks to give the market regulator more teeth.
The two ministries have agreed that Sebi would use the search and seizure powers against listed companies for violations of the Sebi Act and the Securities Regulation Act.
In addition, it would use these powers with the approval of its board and of the court. Regulation for violations under the Companies Act, would continue to be under the DCA.
The issue of overlap of powers between the two regulators has been a bone of contention ever since finance ministry proposed search and seizure powers for Sebi under proposed Sebi Act Amendments.
The issue came up for discussions at an over one-hour-long meeting between Union Finance Minister Yashwant Sinha and Law, Justice and Company Affairs Minister Arun Jaitley. DCA secretary V Dhall and Economic Affairs Secretary C M Vasudev also attended the meeting.
It was decided at the meeting that offences that violate both the Companies Act and the Securities Regulations would be pursued by the two regulators individually.
A final meeting between the Department of Company Affairs and Sebi is scheduled next week to thrash out the nitty-gritty. At the meeting, the finance ministry would prepare fresh comments on the proposed empowerment of the regulator, defining clearly the circumstances under which the powers would be used and how they would be used.
The Finance Ministry clarified at today’s meeting that the search and seizure powers were being sought by Sebi to prevent the kind of scams that had hit the bourses last year.
DCA had, however, raised the issue of possible misuse of the powers.
Top finance ministry officials said the market regulator would be empowered with search and seizure powers but with adequate safeguards. “The idea is to prevent misuse of any power,� sources said. At present, Sebi already has search and seizure powers under Section 234 and 241 of the Companies Act, 1956.
The Finance Ministry, however, wants the powers to be a part of the proposed amendments to the Sebi Act. As per the new Act, a penalty of Rs 25 crore or three times the illegal gains made out of major capital market offences as insider trading was proposed.