Stronger SEBI to expand workforce; gears up for swifter action

Having been given greater authority to take on market manipulators and fraudulent schemes, Sebi has begun the process of beefing up the headcount to around 1,000 for faster and more effective execution of powers.

Updated: Jul 28, 2013, 22:56 PM IST

Mumbai: Having been given greater authority to take on market manipulators and fraudulent schemes, Sebi has begun the process of beefing up the headcount to around 1,000 for faster and more effective execution of powers.

While an independent consultant recently suggested to Sebi that it increase the headcount by more than 50 percent within 2-3 years, from about 600 employees currently, the regulator now aims to expand its workforce at a faster pace, a senior official said.

The government decision to grant greater execution powers and a larger oversight role for potential investment frauds would require Sebi to have a much larger workforce, and the regulator would soon begin hiring officers and other staff members across its various departments and offices, he added.

The regulator has begun internal consultations on its workforce requirements, while it is also considering tapping outside talent pools on case-to-case basis, sources said, adding that Sebi has also begun the groundwork for a large number of prosecution cases it would pursue soon.

A number of entities have not honoured Sebi directives in the past with regard to the payment of penalties, refund of money to investors and other orders. They include entities related to the Saradha and many other cases. Sebi is now working to fast-track its prosecution and recovery cases in these matters, sources said.

Even before grant of greater powers earlier this month through an Ordinance, Sebi had informed its board last month that an increase in headcount is required for the future manpower requirement to take the full ownership of regulatory oversight of all investment schemes, staff requirement in regional offices as well as local offices.

Sebi had further said that its staff strength also needs to be enhanced to meet its future role and functions, especially when seen in the context of resource allocation to its peer regulators.

The capital market regulator is opening local offices on a pan-India basis for enhanced investor awareness and services.

Speaking at Sebi's silver jubilee celebrations in May, Finance Minister P Chidambaram had also emphasised on the need for augmenting staff strength at Sebi.

"The country, the economy and the market are too large and are poised to become larger. We need far more than 600 men and women to regulate the stock market," Chidambaram had said.

On the same occasion, Prime Minister Manmohan Singh also said that the size and sophistication of the Indian securities market had been increasing at a very rapid pace and Sebi also needs to move ahead accordingly in terms of human and technological capabilities.

Expanding Sebi's mandate and powers in a major way, the government has now allowed it to pass orders like search and seizure, attachment of properties, arrest and detention of defaulters and pass disgorgement directions to recover the wrongful gains made in contravention of laws.

At the same time, the government has also allowed Sebi to seek information from other regulators within India and abroad with retrospective effect. It paves the way for collection of details pertaining to cases pending for over 15 years now.

In another retrospective change, which forms part of the Securities Laws Amendment Ordinance promulgated by the President last week, individuals and companies being probed by Sebi can settle their pending investigations. Such settlements can be undertaken in cases that are currently pending for more than six years.

Sebi is also gearing up for a large number of requests for such settlements, which have not got greater legal sanctity after promulgation of the Ordinance on securities laws.

To tackle the growing menace of ponzi schemes being floated as Collective Investment Schemes (CIS), the rules have also been amended to classify any money collection of Rs 100 crore or more as CIS operation. Sebi has been given powers to crack down on illegal investment schemes floated by individuals as well, as against companies only as of now.

However, all government-notified schemes would be out of the Collective Investment Scheme framework.

The changes are part of as many as 22 amendments made by the government in three main Acts governing Sebi and its operations -- the Securities and Exchange Board of India (Sebi) Act, the Securities Contracts Regulation Act (SCRA) and the Depositories Act -- through a 16-page Ordinance.

Among others, Sebi has also been given powers to pass disgorgement orders for amount equivalent to wrongful gains or to losses averted by contravention of regulations.

Besides, the regulator can now enter and search buildings, places, vessels, vehicles and aircraft of defaulters. Its officers can also also break open the lock of any door, box, locker, safe almirah, etc to get information from suspected entities.

The Ordinance also paves way for setting up of special courts to expedite hearing of cases involving contravention of securities laws.

Sebi has also been given direct powers to attach properties and bank accounts of persons and companies failing to comply with directions, involving payment of penalties, refunds to the investors and other dues. The regulator can also order arrest and detention of defaulters in prison.