With the restoration of additional powers to take on fraudsters and market manipulators, SEBI has initiated proceedings against entities suspected to have indulged in ponzi-related schemes in West Bengal and other parts of the country.

Steps are being taken to attach bank accounts and other property and recover penalties and ill-gotten wealth cornered from gullible investors, while the regulator is also finalising search and seizure operations in certain cases to bolster its investigations, a senior official said.

The cases include unauthorised money pooling activities in West Bengal, Assam, other eastern and north-eastern states and some other parts of the country, he added.

With direct powers restored after a gap of two months, SEBI is also initiating prosecution and recovery proceedings in cases where wrongful activities had already been established and orders passed.

The official declined to identify the entities because it may come in the way of the proceedings.

An ordinance was promulgated last week for the third time to grant the additional powers to SEBI.

Besides restoring the powers granted earlier, the third ordinance allows the regulator to enhance its own penalty against defaulters within three months and seek services of the police and central government officers in search and seizure operations.

The first ordinance was promulgated in July last year and was re-promulgated in September. However, the second ordinance lapsed in mid-January after a bill to replace it could not be passed in Parliament.

Now, the necessary amendment bills for various SEBI Acts would need to be passed in Parliament when a new government takes charge after the Lok Sabha elections, which begin on April 7 and conclude on May 12.

The new ordinance came into effect on March 28 and has restored many other powers to crack down on ponzi schemes and other manipulative activities more effectively.

After the ordinance had lapsed, SEBI found it tough to initiate action against entities suspected of market manipulation and fraudulent activities.

One area where SEBI encountered the most difficulties was in seeking information from entities such as banks, telecom companies and others, although the regulator now hopes things will improve on this front.

Actions initiated by SEBI when the ordinance was in force remain valid and the regulator has been moving forward in those cases without problems.

While the ordinance was in force, SEBI had started more than 300 attachment proceedings in about 65 cases for the recovery of close to Rs 2,000 crore from defaulters and fraudsters, including those who raised money through illicit money-pooling activities.

There has been no impact of the ordinance lapse on these cases, the official said, adding that proceedings are being initiated in numerous additional cases now.

The ordinance vests with the Securities and Exchange Board of India various powers, including carrying out search and seizure operations and calling for information from banks, corporations, boards or any other authority. It also allows the regulator to seek telephone call data records.

SEBI will have the power to increase the penalty on an erring entity within three months of passing an order provided the party concerned is given an opportunity to be heard in the matter.


President re-promulgates SEBI ordinanceMarch 29, 2014