The Securities and Exchange Board of India will soon have explicit powers to seize assets of erring market entities. Sources close to the developments said an amendment to the Sebi Act would be made soon to empower the regulator in this regard.
This will be part of amendments that are proposed to be made along with the Budget announcement to empower Sebi to set up an Investor Protection Fund using fines collected by the regulator.
Currently, the regulator has certain implicit powers to fine erring market participants under the Sebi Act and the Fraudulent and Unfair Trade Practices (FUTP) regulations. Section 11(4) of the Sebi Act allows the regulator to "impound and retain proceeds of any transaction which is under investigation."
Similarly, under Section 15(h)a, the regulator can levy a penalty of Rs 25 crore (Rs 250 million) or three times the profits made through unfair means -- whichever is higher.
"There are certain limitations in exercising these powers as they are restrictive. It would be easier to enforce seizing of assets of violators if Sebi has explicit powers to do so. For this, the Sebi Act would have to be amended appropriately," said a Sebi source.
Over the past year, Sebi has cracked down on erring market participants with a few hundred orders passed against penny stocks. But even in cases of market manipulation, the regulator has only barred the market entities from dealing in select securities.
Only in a few cases the regulator has altogether banned the erring entities from the capital market. There are a number of cases of market manipulation where the regulator is yet to pass final orders.
The proposed amendment will arm Sebi to take more stringent action.Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Discussion Group.