According to Rajeev Chandrasekhar, market regulator SEBI should be bound by law to publicly disclose details of its consent agreements and cases, with a view to enhance the transparency, accountability and efficiency of its functioning
Rajeev Chandrasekhar, an independent member of the Rajya Sabha, who is also a member of the Standing Committee on Finance, has proposed some amendments in the Securities Laws (Amendment) Bill 2014. Participating in the debate on the Bill in the upper house, Mr Chandrasekhar said, market regulator Securities and Exchange Board of India (SEBI) should be bound by law to publicly disclose details of its consent agreements and cases, with a view to enhance the transparency, accountability and efficiency of its functioning.
The Parliament on Tuesday approved the SEBI Amendment Bill to empower the market regulator to crack down on ponzi schemes, though it will not have the authority to tap telephone conversations.
Sebi, however, will have the powers to seek call data records for investigation purposes, said Finance Minister Arun Jaitley while piloting the Bill, which was passed by the Rajya Sabha.
Lok Sabha had last week passed this Bill.
Mr Chandrasekhar, the independent MP, also called for a for a revision of the criterion for classifying collective investment schemes (CIS), introduction of safeguards against the SEBI’s power of attachment and an increase in sums of punitive fines for defaulters. He said, the definition of CIS should specify the number of investors, as this would ensure that the regulatory gap for these schemes is bridged.
Pointing out that the current penalties prescribed for defaulters under the bill were inadequate, Mr Chandrasekhar urged the government to consider raising these to Rs5 crore per day from the existing Rs5 lakh per day for insider trading related defaults. For defaults related to investor grievances, mutual funds, asset management companies and stock brokers, the penalties should be raised to Rs1 crore a day from the current Rs1 lakh per day, he said.
Key points made by the Mr Chandrasekhar are:
Criterion for Classification of Collective Investment Schemes: As per Clause 3 of the Bill, SEBI would have the power to regulate all schemes that have a corpus of up to Rs100 crore. Mr Chandrasekhar said there was a need to append to this clause, a specification on the number of investors. By specifying that all corpuses with to up to 500 investors are covered by the Bill, even smaller entities regularly pooling their funds under investment contracts would come under regulatory scrutiny.
He also highlighted that the definition of CIS under the Bill is too broad, and therein posed the risk of facilitating harassment of legitimate, small-scale businesses. This would have to be considered in the light of the fact that the only existing CIS entity that has registered with SEBI (since the CIS regulations were introduced in 1999) is yet to launch even a single scheme, he pointed out.
SEBI’s Power of Attachment: Mr Chandrasekhar also raised a concern regarding Clauses 21 and 35 of the Bill that relate to SEBI’s power of attachment. He asserted that the power to attach that SEBI has been bestowed with in this Bill must be moderated through a magistrate, just as in the case with search and seizure orders. This would serve as reasonable safeguards on SEBI’s power, he said.
Transparency in the Functioning of SEBI: Mr Chandrasekhar pointed to the need for the Act to introduce an additional clause that would ensure that all consent agreements and cases of the regulator are publicly disclosed. Disclosure, he asserted, must be made legal and binding on the regulator as this would go a long way in enhancing the efficacy and transparency of SEBI’s functioning.
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SEBI has sought certain clarifications from Lavasa Corp and Adlabs Entertainment on their IPOs
Market regulator Securities and Exchange Board of India (SEBI) has sought clarifications from Lavas Corp, a unit of Hindustan Construction Co (HCC) and Adlabs Entertainment on their proposed initial public offering (IPO).
Without disclosing the details of clarifications sought from Lavasa, SEBI has said “clarifications (are) awaited from lead manager” for the proposed public issue of Rs750 crore.
As per the latest weekly update to the processing status of draft offer documents, SEBI has said clarifications were awaited on the proposed IPO of Lavasa as on 8 August 2014.
SEBI said that it might issue observations on Lavasa’s IPO document within 30 days from the date of receipt of satisfactory reply from the lead merchant bankers to the clarification or additional information sought from them.
The regulator had received the draft offer documents on 1st July this year through Lavasa's lead manager Axis Capital.
Lavasa has filed its draft red-herring prospectus with SEBI to go in for an IPO of its equity shares of Rs10 each aggregating to Rs750 crore.
Lavasa, which is developing a large township (hill city) in 10,000 hectares at ‘Lavasa’ near Pune, is making a second attempt to raise money though IPO.
In November 2010, Lavasa had got the SEBI clearance for an IPO to raise up to Rs2,000 crore, but bad market conditions forced the company to scrap the plan.
HCC group owns 68.72% stake in Lavasa.
Separately, SEBI has sought fresh clarifications from Adlabs Entertainment regarding the company’s proposed IPO. However, the regulator did not disclose about the details of clarifications sought from the lead managers.
Adlabs Entertainment runs amusement park — Adlabs built by film producer and director Manmohan Shetty.
The regulator had received the draft offer documents on 22 May 2014, through its lead manager.
The company has proposed a public issue of 2.3 crore equity shares of face value of Rs10 each. The issue comprises a fresh public issue of up to 2.2 crore shares and an offer for sale of up to 20 lakh shares by the promoter Thrill Park.
Adlabs Entertainment intends to deploy the funds raised from the fresh issue for payment of loans and general corporate. Besides, the company is considering a pre-IPO placement of up to three lakh equity shares for about Rs80 crore.