With a view to make the securities market more efficient and enforcement of regulations wider, regulator Securities and Exchange Board of India (Sebi) has proposed a series of amendments in the acts that govern them. These proposals entail sweeping changes in the manner in which enquiry and adjudication take place, widening its reach over securities and getting more powers in the area of price rigging by corporates, especially in takeovers and acquisitions.
The amendments pertain to the Sebi Act, Securities Contracts Act and the Depositories Act. In a move to speed up the process enforcement, the regulator proposes the combing of the currently separate functions of adjudicating and enquiry. Sebi has proposed that there be a single officer who will carry out both the functions and will have powers to impose monetary penalty as well as order the cancellation or suspension of registration of individuals or entities involved in market manipulation.
Currently, the enquiry officer has powers to suspend or cancel registration and an adjudicating officer powers to impose monetary penalty. The combined adjudicating and enquiring officer will be in the rank of chief general manager (CGM). ?And when the matter reaches the tribunal, there is a high court judge who presides over the matter. And there is a distinct level change between a CGM and a judge,? says a senior Sebi official.
?If the enquiring officer feels a particular case requires just monetary penalty, he doesn?t have the powers to pass it. Similarly, if an adjudicating officer thinks a particular case warrants suspension or cancellation of registration, the current regulation doesn?t allow him to do,? he adds. By making a CGM in charge of both enquiry and adjudication, dealing of matters would be speeded up and companies and complainants can always take a recourse to the Board in case they are unhappy with the judgement and get it resolved.
Further, Sebi has proposed changes in the definition of ?securities? in the proposed amendments that will have a far reaching implication on the financial market transactions. This would result in more number of instruments under one regulator. ?There will be four to five parameters on the basis of which securities will be redefined. This will increase the scope of instruments that will come under Sebi?s regulation?, said the Sebi official. There are instances when a lot many intermediaries would engineer products overseas and in India that could, technically, not come under the purview of the current definition, hence, this move.
More importantly, Sebi has also recommended extending its power to inspect, investigate and pass cease and desist order for any violation in the substantial acquisition and takeover guidelines specified by the market regulator. Currently the regulator has powers to implement these measures on listed companies only in case of alleged insider trading activities and market manipulation. A cease and desist (C&D) is an order to halt an activity or else face legal action. The recipient of the cease and desist may be an individual or an organisation.
Sebi official said, ?several instances have come to Sebi?s notice where insider trading and market manipulation happens just before the announcement of takeover by a company. So increasing the Sebi?s power to one more area would help in enforcing its rule in a more efficient way.?
Widening reach
•The amendments pertain to the Sebi Act, Securities Contracts Act and the Depositories Act
•The proposals to amendments entail sweeping changes in the manner in which enquiry and adjudication take place
•It aims to widen its reach over securities and getting more powers in the area of price rigging by corporates, especially in takeovers and acquisitions
•The regulator proposes combing of the currently separate functions of adjudicating and enquiry
•It has proposed changes in the definition of securities in the proposed amendments that will have a far reaching implication on the financial market transactions
•It has also recommended extending its power to inspect, investigate and pass cease and desist order for any violation in the substantial acquisition and takeover guidelines specified by the market regulator