Offences relating to securities market might soon invite more severe punishment. The government, in consultation with the Securities and Exchange Board of India (Sebi), is looking to tighten rules that could lead to criminal prosecution of market offenders, reported Economic Times.
This will require amendments to the Sebi Act, they said.
Sebi is currently vested with powers equivalent to that of a civil court and passes penalty orders against entities that commit market offences. However, if it wants to initiate criminal prosecution against any such market perpetrators, it has to go through the regular courts. In the past few years, Sebi hasn’t used its prosecution powers too often.
But in the new Sebi Act that’s in the works, the government is planning to make it mandatory for the regulator to prosecute certain kinds of offences.
The idea is to create a greater deterrent against fraud by market entities. This change is in line with the Companies Act, under which certain kinds of violations can’t be settled through penalties.
According to Sebi’s annual report for FY21, the market regulator initiated proceedings in 1,763 cases, out of which prosecution was started in three. In FY20, Sebi initiated action in 2,070 cases, of which only 10 involved prosecution, data showed.
Delays in proceedings and the higher threshold for evidence in regular courts were two key reasons why Sebi has chosen to rarely exercise prosecution powers, said market participants.