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The government used ordinance route to amend various SEBI Acts due to rising instances of people getting defrauded by fraudulent money-pooling, Ponzi and MLM schemes
The Indian government said, since fraudsters are adopting innovative ways of pooling funds from gullible investors, it becomes necessary to provide greater powers to market regulator Securities and Exchange Board of India (SEBI) to tackle this growing menace of Ponzi schemes.
Justifying promulgation of ordinance to amend various SEBI Acts between August and September, the government said this was done to remove a lacuna that allowed fraudsters to escape regulatory actions.
The amendments to existing laws would provide the SEBI greater powers to respond to the “growing menace of illegal deposit taking and Ponzi schemes,” the Government informed the Parliament.
The ordinance came amid rising instances of people getting defrauded by fraudulent money-pooling schemes.
With the amendments, SEBI would have powers to access call records as well as carry out search and seizure, among others.
With regard to investigations, SEBI would have powers for seeking information and records from any entity, including bank or any other authority established or constituted under Central or State Acts.
Among others, special courts are proposed to be set up for speedy trial of offences under the SEBI Act.
The Securities Laws (Amendment) Ordinance, 2013, was first promulgated on 18th July.
Later, Securities Laws (Amendments) Bill, 2013, was introduced in the Lok Sabha and then referred to the Parliamentary Standing Committee on Finance. Since the Bill was not passed, the ordinance was promulgated for the second time on 16th September by the President.
Meanwhile, SEBI has proposed detailed guidelines for its new powers, including for the procedure to be adopted for search and seizure operations.
The proposed norms focus on detailed procedures that need to be laid down relating to the procedural safeguards during different stages of search and seizure and the rights of those persons subjected to search and the obligations of the authorised persons.
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