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Rs 20-cr penalty mooted for market offences

Shaji Vikraman

Hema Ramakrishnan

NEW DELHI, Sept. 17

THE Government has proposed a hefty penalty of over Rs 20 crore or three times the amount involved in the offence committed in capital market offences, as part of the proposed changes to the SEBI Act.

The proposal to impose stiff penalties for capital market offences, along with other amendments to the SEBI Act which have been cleared by the Finance Minister and other administrative ministries, is aimed as a major deterrent to errant players in the ma rket, according to senior Government officials. It is also expected to bolster the confidence of investors, whose faith in the market and the regulator have taken a major knock recently.

The proposals for amending the SEBI Act which have been cleared by the Finance Ministry, the Department of Company Affairs (DCA) and the Law Ministry are set to be taken to the Cabinet for approval shortly. The plan now is to issue an Ordinance to bring into effect the proposed amendments to the SEBI Act to strengthen SEBI.

The Government reckons that it may be too late to wait until Parliament approves the draft Securities Law (Amendment Bill 2001). Hence, the proposal now to take the Ordinance route now.

The Finance Minister, Mr Yashwant Sinha, had stated in Parliament during the last session that the Government would enhance the powers of SEBI.

The SEBI Act now provides for a maximum penalty of Rs 5 lakh, irrespective of the nature of the offence. This discrepancy is now sought to be removed in the amendments to the SEBI Act.

The other major amendments to the SEBI Act which have been finalised include broad-basing the SEBI board, to ensure that it is a truly board-run institution. The SEBI board will now have four full-time members on the board, excluding the Chairman. The pl an is to assign specific divisions to these directors such as surveillance, corporates and legal affairs.

The amendments, when approved, will give the capital market regulator enough investigative powers which will include powers for search and seizure of intermediaries and other market players and retaining of books of accounts and suspending of trading of scrips, wherever there are allegations of manipulation.