Securities and Exchange Board of India Granted More Powers to Protect Investors

August 15, 2014 Posted by India Briefing Reading Time: 3 minutes

DELHI – On Tuesday, the Securities Laws (Amendment) Bill 2014 was passed by the Rajya Sabha, India’s upper house, after being passed by the Lok Sabha, the lower house, last week.

The bill is intended to give the country’s capital market regulator, the Securities and Exchange Board of India (SEBI), the power needed to crack down on fraudulent investment schemes and insider trading.

The Asian giant has recently been seeing a growing number of multi-level market schemes (effectively Ponzi schemes) disguised as Collective Investment Schemes (CIS).

The new powers will enable SEBI investigators to search premises, make seizures and even access call data records. They will be able to seek information on suspected entities both within and outside India, in some cases gathering details going back over 15 years, as well as passing disgorgement orders to retrieve and facilitate the return of illegally obtained money to identifiable investors.

The bill, which is awaiting the signature of the president, stops short at phone tapping.

“The Act has been fine-tuned and new architecture with wider language has been introduced,” said finance minister Arun Jaitley. “SEBI has no power to tap telephones… SEBI can call for information on call data records. The power to bug or intercept is not given to SEBI within the Act.”

Furthermore, no search operation can be conducted without the prior approval of a specialized Mumbai court, where the regulator is headquartered.

And despite concerns that SEBI is being given too much power, investors on the whole have reacted favorably. “The move is in the right direction, though one may debate that a lot more could have been done,” said Sudip Bandyopadhyay, managing director and chief executive of brokerage firm Destimoney Securities Pvt. Ltd.

Since his landslide election victory in May, investors the world over have been eagerly waiting to see if Prime Minister Navendra Modi would keep his promises to make India more business friendly. So far he has not disappointed, although there is still much to be done. To echo Mr. Bandyopadhay’s sentiments, this is indeed yet another “move in the right direction.”

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

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