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DCA objection to Sebi search powers persists

BS Economy Bureau in New Delhi

Contrary to expectation, the merger of the department of company affairs with the finance ministry has not resulted in a resolution to the impasse on the amendment to the Securities and Exchange Board of India Act.

Instead, a final decision is still awaited with the DCA refusing to let go of its search and seizure powers.

Finance ministry officials said that the DCA maintained its objection to the enhancement of penalties levied by Sebi.

They added the issues had not been resolved despite a meeting between officials of the finance ministry and the DCA, and the matter had been referred to the finance secretary.

DCA officials, however, said the differences concerning amendments to the Sebi Act had been resolved but there were some drafting issues which would be sorted out this week.

Following a meeting between former finance minister Yashwant Sinha and former minister for law Arun Jaitley, a consensus had been reached on the transfer of search and seizure powers to Sebi with adequate safeguards to be built into the amendment Bill.

The safeguard mechanism worked out by the two ministries involved confirmation of the order by the Sebi chairman and an authority like a judicial magistrate.

The finance ministry and the DCA had also agreed to permit Sebi to levy a penalty of up to Rs 25 crore (Rs 250 million) in the case of fraud and insider trading.

The penalties, attracting a fine of Rs 1 lakh (Rs 100,000) a day, include default by brokers, failure to furnish returns and information by corporates and brokers and other lapses covered by the Sections 15 A, B, C, E and F of the Sebi Act.

The market regulator was to be permitted to levy a penalty of Rs 1 lakh a day or a maximum fine of Rs 1 crore (Rs 10 million), whichever was lower.

The finance ministry had earlier proposed Sebi should be allowed to levy a penalty of Rs 10 lakh (Rs 1 million) a day in the case of default by a broker and Rs 5 lakh (Rs 5 million) a day for a failure to furnish information and returns.

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