Search and seizure power to SEBI

This year witnessed a new feather in the powerful wings of the SEBI, as it was given extra powers to crackdown against fraudsters. The SEBI recently notified new norms, which empower its Chairman to order search and seizure operations during investigations, while necessary safeguards have also been put in place to protect rights of affected persons.

The SEBI notified these regulations for greater oversight on Collective Investment Schemes (CIS). As per this power, SEBI has authority to conduct search and seizure. These regulations also provide detailed procedures to be followed for issuance of warrants and execution of search and seizure orders, among others.

The Securities Laws (Amendment) Ordinance, 2013 provides for regulation of pooling of funds under any scheme or arrangement, involving a corpus amount of 100 crore rupees or more, to be deemed to be a Collective Investment Scheme (CIS), subject to sub-section (3) of section 11AA of the SEBI Act.

Hence the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, was amended for providing a framework for regulation of such deemed Collective Investment Schemes and additional requirements for continuous compliance by a registered Collective Investment Scheme.

According to Section 11AA of the SEBI Act, CIS is any scheme or arrangement, which satisfies the following conditions:

1. the contributions, or payments made by the investors, which are pooled and utilized solely for the purposes of the scheme or arrangement;
2. the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;
3. the property, contribution or investment forming part of scheme or arrangement, which, is managed on behalf of the investors;
4. the investors do not have day to day control over the management and operation of the scheme or arrangement.