MUMBAI: To bolster its evidence-gathering mechanism, Sebi Tuesday said it may approach the government to seek powers to intercept calls and electronic communications of those suspected of serious economic offences.
The committee, headed by former law secretary and Lok Sabha's ex-secretary general T K Viswanathan, had suggested last month that Sebi may seek direct power to intercept calls and electronic communication by ensuring proper checks and balances, like some other regulatory agencies.
After putting up the suggestion for a public consultation process, Sebi (Securities and Exchange Board of India) has discussed the proposal in its board meeting.
"On the recommendation that Sebi may seek direct power to intercept calls and electronic communication under the Telegraph Act, it was decided that the matter may be referred to the government to take an appropriate view," Sebi Chairman Ajay Tyagi told reporters here after the board meeting.
Currently, the regulator has powers to seek call data records as part of its probes, but the committee is of the view that the regulator needs more powers to assist in its regulatory responsibilities.
Further, Tyagi said the board has approved amendments to PFTUP (Prohibition of Fraudulent and Unfair Trade Practices regulations and PIT (Prohibition of Insider Trading) norms based on the recommendations of the committee.
The changes relate to 'dealing in securities' expanding the scope of the regulations to include employees and agents of intermediaries.
Further, these amendments pertain to the strengthening of the deeming provisions for fraud to include activities such as misleading information on digital media, front running by non-intermediaries, mis-selling of securities and services related to securities, mis-utilisation of client account and diversion of client funds, manipulating benchmark price of securities among others.
On the issue of use of front entities or 'mule accounts' for engaging in fraudulent transactions and related recommendations on affordability index, Tyagi said it has been decided to discuss this matter further with stakeholders.
He said amendments to the PIT Regulations include amendments to include bringing further clarity on sharing of unpublished price sensitive information (UPSI)for due diligence or legitimate purposes, the creation of database of persons with whom such UPSI is shared, additional defences when trading in possession of UPSI, additional disclosures for aiding Sebi in investigations.
Besides, the proposal has been cleared for the introduction of framework for institutional responsibility to ensure that the institution takes responsibility to formulate a code of conduct and put in place an effective system of internal controls to ensure compliance to prevent insider trading.
On the issue of additional disclosures, considering public comments, Sebi said the proposal for disclosure of name and PAN number or equivalent identification of persons residing at the same address as the designated persons for a consecutive period of more than one year and disclosure of phone number whose billing address is residence address of the designated person was dropped.
With regard to the applicability of code of conduct to designated persons as proposed to be defined, the regulator said it has been agreed that employees/ CEO of associate companies may be excluded from the applicability of the code of conduct.
Besides, Sebi has decided to simplify the existing framework on re-classification of promoters as public shareholders.
The promoter seeking re-classification and persons related to them should not hold over 10 per cent of the total voting power or exercise control over the listed entity or have special rights in the company, should not be represented on the board of the listed entity or act as key managerial persons for 3 years from such re-classification and should not be willful defaulters.
"The revised process provides for application for reclassification by the promoter seeking, review by the company's board and approval by the shareholders, with existing promoters and related persons not allowed to vote," Sebi said.
Further, Sebi has decided to restrict fugitive economic offenders from making an open offer, counter offer or acquiring any shares or voting rights or control in a target company.
Also, restrictions have been put in place on raising capital through initial public offers (IPOs), rights issue, further public offers, preferential issue, Qualified Institutional Placement, IPO of Indian Depository Receipts (IDRs) and rights issue of IDRs , if any of the promoter or director of the issuer is a fugitive economic offender.
Further, restrictions on listing on institutional trading platform and issue of bonus shares if any of the promoter or director of the issuer is a fugitive economic offender.