In the midst of several securities laws violations that have been unearthed in the recent past, the Securities Laws (Amendment) Ordinances, which have been successively re-promulgated, have equipped SEBI with the regulatory ammunition that is required to deal with several securities laws violations such as illegal pooling of funds and other frauds on the market. An ordinance is in effect for a period of six months and the Securities Laws (Amendment) Second Ordinance, 2013 promulgated on September 16, 2013 lapsed in January this year. In the interest of maintaining continuity and considering the implication on an ongoing investigation in case of a sudden regulatory vacuum where action is initiated based on the enhanced powers, but could not have continued because of the lapse, the President has re-promulgated the ordinance on March 28, 2014.

More importantly, it must be pointed out that the current ordinance stands modified in respect of certain issues. First, a new Section 11C (8A) has been introduced which allows an authorised officer to requisition the services of a police officer or any central government officer while conducting search and seizure. Second, the ordinance envisioned a mechanism where the requirement to approach a judicial magistrate to before conducting a search and seizure operation was removed. Concerns were raised regarding the possibility of arbitrary action on the part of the regulator. However, the current ordinance has addressed this concern to a large extent by imposing an obligation on the Chairman of SEBI to record his reasons in writing for authorizing a search and seizure operation.

Although the above moves are laudable, there is another addition which has managed to raise some eyebrows. The ordinance has introduced a new sub-Section 15 I (3) which authorises the Board to call for and examine an order passed by an adjudicating officer and if the Board is of the opinion that such an order is erroneous and not in the interest of the securities market, the Board may enhance the quantum of penalty imposed under such an order. There is a clear demarcation of jurisdiction between the AO and the Board. Such a provision would result in unnecessary encroachment into the independent jurisdiction of an AO by the Board and hence lead to unwanted confusion and delays.