The government is planning a slew of amendments to the Securities and Exchange Board of India (Sebi) Act in the forthcoming Budget session.

According to official sources, the amendments will be made to enable the market regulator to introduce plea bargain, disgorgement, among other things.

The ministry has called a meeting of the Sebi officials to discuss and finalise these amendments before placing it for the amendment.

The Act will also incorporate the clause of compounding of cases in the capital market.

This power will be accorded to the court and not to the Sebi. Compounding relates to settling of offences in the market through monetary penalty and to cut litigation.

It will be similar to the powers of the Reserve Bank of India to compound the issues under the Foreign Exchange Management Act whereby the contravener need not go through litigation.

Plea bargaining refers to settling down at a lesser charge for an offence. Sources added this might be allowed for select category of cases and not all. On the other hand, the Sebi has already passed orders for disgorgement without any specific mention of the powers in its Act.

Experts said the Sebi could pass any order under section 11 of the Sebi Act for protection of small investors.

However, specifying the clauses categorically in the Sebi Act will provide more clarity and transparency.  The amendments will also incorporate the creation of an investor protection fund and the provision that all fees and charges collected by the regulator will be transferred to the government account.

Among other things, this will include fees collected from brokers, penalties imposed, etc. After the funds were transferred to the government account, the Sebi might have to take the permission of the government to withdraw funds for use, said sources.

Meanwhile, the Sebi in exercising its powers of disgorgement had directed ten entities to cough up around Rs 115.81 crore (Rs 1.158 billion) for violations of the 'know your customer' (KYC) norms in allotment of shares in 21 initial public offers during 2003-05.

The Sebi disgorgement order is related to making the entities pay for the unethical gains they made in the IPO scam and the money so secured will be used to compensate the affected parties.