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JPC moots 19-point agenda to strengthen Sebi

The Joint Parliamentary Committee probing the stock scam has mooted a 19-point agenda to give Sebi more teeth in investigation and enforcement, even though the market watchdog had a poor track record of punishing wrong-doers by utilising the existing powers.

In its draft report, the committee said Sebi should have enforcement powers like imposing monetary penalty of Rs 250 million or three times the ill-gotten "profit made" or "loss avoided."

JPC also suggested imprisonment of up to 10 years on conviction for violation of Sebi Act 1992.

Sebi should be empowered to retain proceeds of securities transaction and suspension of an intermediary pending investigation, powers to issue "cease and desist" orders, powers to disgorge and impound ill-gotten money, it said.

The market regulator should also have powers to issue directions debarring persons from dealing and accessing the securities market, JPC said.

Emphasising on investor protection, the JPC said the Sebi Act should also provide for specific right for investors to approach courts and claim damages, compensation and interest.

It also suggested expeditious measures to attach properties of defaulting promoters, directors and companies.

The committee also prescribed specific power of investigation, power to impound/retain documents pending investigations, and powers to obtain information from banks, corporates, promoters who deal in securities market and authorities like Mahanagar Telephone Nigam Limited.

The capital market regulator should also have powers to obtain information about the source of fund and to tender immunity from action for making disclosures of facts relating to contravention of regulation under investigation, the JPC said.

The committee also proposed that the Securities Appelate Tribunal be made a multi-member body while mooting a "special court" for securities market.

The number of board members in the Sebi should also be suitably enhanced, it said.

JPC, however, criticised the market regulator for not being able to punish erring companies under the existing norms.

"The track record of Sebi in punishing the wrong doers in stock market has been dismal. Sebi could initiate prosecution proceedings on insider trading in only one case and on fraudulent and unfair trade practices in just cases," it said.

JPC further said that only in seven out of 181 cases Sebi resorted to cancellation of registration during the last four years. "All this is indicative of Sebi's reluctance to take severe action against the offenders," it added.

Though Sebi's plea for more powers to strengthen its effectiveness cannot be faulted, the report said: "The committee received an impression that Sebi was not fully enforcing the powers already vested with it."

It cited the powers to impose Rs 140,000 penalty on a person failing to furnish requisite information and said "rarely has this power been exercised by Sebi."

"Similarly, the provision for mandatory punishment of imprisonment, etc. in addition to award of penalty has scarcely been used," it added.

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