Securities and Exchange Board of India: Investigation

06-DEC-2014 12:10

    Investigation can be defined under Sec 11C of the Securities and Exchange Board of India Act, 1992.

    11C. (1) Where the Board has rational ground to consider that –

    (a) the transactions in securities are being handled with in a manner unfavorable to the investors or the securities market; or

    (b) any mediator or any person linked with the securities market has violated the provisions of this Act or the rules or regulations made or directions issued by Board thereunder,

    It may, at any time in writing, direct any person specified in the order to look into the affairs of such persons related with the securities market & to report thereon to the Board.

    (2) Without prejudice to the provisions of section 235 to section 241 of the Companies Act, 1956(1 of 1956), it shall be the obligation of every manager, officer, managing director and other employee of the company & every intermediary referred to in sec 12 or every person related with the securities market to protect & to produce to the Investigating Authority, all the registers, books, other documents & record of, or relating to, the company, of or relating to, the intermediary or such person, which are in their power or custody.

    (3) The Investigating Authority may necessitate any intermediary or any person connected with securities market in any manner to provide such information to, or produce such registers, or books, or record, or other documents, before it or any person authorized by it in this behalf as it may think necessary if the furnishing of such piece of information or the production of such registers, or books, or other documents, or record is applicable or essential for the purposes of its investigation.

    (4) The Investigating Authority may keep in its custody any registers, books, other documents & record produced under sub - section (2) or sub - section (3) for 6 months & subsequently shall return the same to any intermediary or any person related with securities market by whom or on whose behalf the registers, books, other documents & records are produced:

    Provided that the Investigating Authority may call for any register, book, other document & record if they are needed again:

    Provided added that if the person on whose behalf the registers, books, other documents & record are produced necessitates certified copies of the registers, books, other documents & record produced before the Investigating Authority, it shall give certified copies of such registers, books, other documents & record to such person or on whose behalf the books, registers, other documents and record were produced.

    (5) Any person, intended to make an investigation under sub - section (1), may observe on oath, any manager, officer, managing director & other employee of any intermediary or any person related with securities market in any manner, in relation to the affairs of his business & may administer an oath consequently & for that purpose may necessitate any of those persons to appear before it personally.

    (6) If any person becomes unsuccessful without reasonable cause or refuses –

    (a) to generate to the Investigating Authority or any person authorized by it in this behalf any book, register, other document & record which it is his duty under sub - section (2) or sub - section (3) to produce; or

    (b) to deliver any information which is his duty under sub - section (3) to furnish; or

    (c) to appear before Investigating Authority in person when required to do so under sub - section (5) or to answer any question which is put to him by Investigating Authority in pursuance of that sub - section; or

    (d) to sign the notes of examination as stated in sub - section (7),
    he shall be liable to be punished with imprisonment for a term which may pull out to one year, or with fine, which may extend to Rs. 1 crore, or with both, & also with a additional fine which may extend to Rs. 5 lakh for every day after the 1st during which the refusal or failure continues.

    (7) Notes of any exam under sub - section (5) shall be taken down in writing & shall be read over to, or by, & signed by, the person observed, and may subsequently be used in substantiation against him.

    (8) Where in the period of investigation, the Investigating Authority has rational ground to consider that the registers, books, other documents & record of, or relating to, any intermediary or person related with securities market in any manner, may be mutilated, destroyed, altered, secreted, falsified, the Investigating Authority may make an application to the Judicial Magistrate of the 1st class having jurisdiction for an order for the seizure of such registers, books other documents and record.

    (9) After taking into consideration the application & hearing the Investigating Authority, if needed, the Magistrate may, authorize the Investigating Authority –

    (a) to enter, with such support, as may be essential, the place where such registers, books, other documents & record are kept;

    (b) to investigate that place or those places in the manner specified in the order; &

    (c) to seize registers, books, other documents & record, it considers indispensable for the purposes of investigation:

    Provided that the Magistrate shall not approve seizure of registers, books, other documents & record, of any listed public company or public company which aims to get its securities listed on any recognized stock exchange unless such company indulges in market manipulation or insider trading.

    (10) The Investigating Authority shall keep in its custody the registers, books, other documents & record seized under this section for such phase not later than the conclusion of investigation as it considers obligatory & subsequently shall return the same to the company or other body corporate, or, as the case may be, to the manager or managing director or any person, from whose custody or power they were detained and notify the Magistrate of such return;

    Provided that the Investigating Authority may, before giving back such registers, books, other documents & record as aforementioned, place identification marks on them or any part there of.

     

    Source: http://www.sebi.gov.in/

    Read more:SEBI , Investigation

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