Sebi will now have powers to regulate any pooling of funds under an investment contract involving a corpus of `100 crore or more and attach assets in case of non-compliance. This should help Sebi supervise entities that do not fall under any regulated category. Photo: Abhijit Bhatlekar/Mint (Abhijit Bhatlekar/Mint)
Sebi will now have powers to regulate any pooling of funds under an investment contract involving a corpus of `100 crore or more and attach assets in case of non-compliance. This should help Sebi supervise entities that do not fall under any regulated category. Photo: Abhijit Bhatlekar/Mint
(Abhijit Bhatlekar/Mint)

Presidential ordinance grants Sebi more powers

Sebi will now have more powers for checking illegal collective investment schemes and to curb insider trading

New Delhi: The government moved swiftly on Thursday to give more powers to the capital markets regulator to protect investor interests and check frauds with the President promulgating an ordinance to amend various securities laws.

The Securities and Exchange Board of India, or Sebi, will now have more powers for checking illegal collective investment schemes and to curb insider trading, the finance ministry said in a statement.

The cabinet had given its nod to the proposal on Wednesday to give Sebi the legal backing to crack down on new methods of fund-raising that do not come under the purview of Sebi Collective Investment Scheme regulations or under other regulations.

Sebi will now have powers to regulate any pooling of funds under an investment contract involving a corpus of 100 crore or more and attach assets in case of non-compliance. This should help Sebi supervise entities that do not fall under any regulated category.

The chairman of Sebi will have powers to authorize search and seizure operations as part of efforts to crack down on ponzi schemes.

The regulator will also have the powers to seek information such as telephone call data records during the course of its investigation. Special courts will also be set up to fast-track the resolution of pending Sebi-related cases.

The ordinance will make effective amendments to the Sebi Act, Securities Contracts (Regulation) Act, and the Depositories Act.

These were finalized after detailed consultations with Sebi and various other departments, the statement said.

The Union government had constituted an inter-ministerial group following the collapse of the West Bengal-based Saradha Group to look into ways to plug regulatory loopholes around such pyramid schemes that collect money from the general public as some form of deposit.

These schemes escape scrutiny since they cannot be classified as a collective investment scheme, or a chit fund, or a non-banking financial company (NBFC).

At present, while collective investments schemes are regulated by Sebi, the Reserve Bank of India regulates NBFCs and the Chit Fund Act, 1982, and the state governments oversee chit funds.

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