Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2022.
The SEBI has notified vide Notification No. SEBI/LAD-NRO/GN/2022/71 Dtd. 25th January, 2022 a new set of regulations to amend the existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, which shall come into force on the date of its publication in the Official Gazette i.e., 25th January, 2022.
| Sr. No. | Amendment | Comments |
| 1 |
Substitution: Regulation 2(2) The words and expressions used and not defined in these regulations but defined in the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Depositories Act, 1996 (22 of 1996), the Companies Act, 2013 (18 of 2013), or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those acts, rules or regulations made thereunder or any statutory modification or re-enactment thereto, as the case may be. |
In the existing provision, reference was given only to the SEBI Act, 1992 and the rules and regulations made thereunder. With this amendment, reference is also drawn to the SCRA, DP Act and the Companies Act and the rules and regulations made thereunder. |
| 2 |
Substitution: Regulation 4(2)(k) disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading in a reckless or careless manner and which is designed to, or likely to influence the decision of investors dealing in securities. |
Regulation 4(2) provides the list of activities of dealing in securities which shall be deemed to be a manipulative fraudulent or an unfair trade practice. In clause (k), the words in a reckless or careless manner are added. This amendment in effect implies that if the said act is done in an innocent manner, without being aware that the info is false or misleading with utmost caution and care then such act shall not be deemed to be a manipulative fraudulent or an unfair trade practice. |
| 3 |
Insertion: Regulation 6(2) after the words “has been conducting” and before the words “in violation of”, the words “its activities” shall be inserted. |
Clerical updation. to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12 of the Act) which intends to get its securities listed on any recognized stock exchange where the Investigating Authority has reasonable grounds to believe that such company has been conducting its activities in violation of these regulations. |
| 4 |
Omission: Regulation 6(4) the words “one month which may be extended upto a period of” and the words “by the Board” shall be omitted. |
Self-explanatory. to keep in his custody any books, registers, other documents and record produced under this regulation for a maximum period of one month which may be extended upto a period of six months by the Board. |
| 5 | Insertion: after Regulation 6(6)
(7) to call for information and record from any person including any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation; (8) to make an application to the Judge of the designated court in Mumbai as notified by the Central Government for an order for the seizure of any books, registers, other documents and record, if in the course of investigation, the Investigating Authority has reasonable ground to believe that such books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted; (9) to keep in his custody the books, registers, other documents and record seized under these regulations for such period not later than the conclusion of the investigation as he considers necessary and thereafter to return the same to the person, the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person from whose custody or power they were seized: Provided that the Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof; (10) save as otherwise provided in this regulation, every search or seizure made under this regulation shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures made under that Code. |
By this amendment, 4 new powers have been added in Regulation 6 which shall be available to the Investigating Authority to conduct the investigation. These powers were specifically provided in Regulation 7 which were exercisable by the Investigating Authority only after obtaining prior approval from the Chairman or Member. Vide this amendment, the requirement of obtaining prior approval is done away with and Regulation 7 is also omitted. |
| 6 | Omission: Regulation 7 | – |
| 7 |
Substitution, Omission: Regulation 8(1) a. the words and figure “under regulation 7” shall be substituted with the words and figure “under regulation 5”. b. in clause (b), the words and figure “or regulation 7” shall be omitted; |
– |
| 8 |
Insertion, Substitution: Regulation 8(3) a. in clause (a), after the words “Investigating Authority” and before the words “to have access”, the words “or any person authorized by him in this behalf” shall be inserted; b. in clause (b), after the words “Investigating Authority” and before the words “reasonable facilities”, the words “or any person authorized by him in this behalf” shall be inserted; c. clause (c) shall be substituted with the following, namely– “(c) provide to such Investigating Authority or any person authorized by him in this behalf any such books, accounts and records which, in the opinion of the Investigating Authority, are relevant to the investigation or, as the case may be, allow the Investigating Authority or any person authorized by him in this behalf to take computer print-outs thereof.” |
The purpose of this amendment is empowering any person authorized by the Investigating Authority under Regulation 8(3). |
| 9 |
Substitution: Regulation 11(2) Any final order passed under sub- regulation (1) shall be put on the website of the Board. |
In the existing provisions, the Board was required to issue a press release in respect of any final order passed under sub-regulation (1) in at least two newspapers of which one shall have nationwide circulation and also to put the order on the website of the Board. Vide this notification, the requirement of press release is omitted. |
| 10 |
Substitution: Regulation 11A 11A. (1) A summons or notice issued by the Board under these regulations shall be served on the person through any of the following modes, namely— (a) by delivering or tendering it to that person or his duly authorised agent; or (b) by sending it to the person by fax or electronic mail or electronic instant messaging services along with electronic mail or by courier or speed post or registered post: Provided that the courier or speed post or registered post shall be sent to the address of his place of residence or his last known place of residence or the place where he carried on, or last carried on, business or personally works, or last worked, for gain, with acknowledgment due: Provided further that a summons or notice sent by fax shall bear a note that the same is being sent by fax and in case the document contains annexure, the number of pages being sent shall also be mentioned: Provided further that a summons or notice sent through electronic mail or electronic instant messaging services along with electronic mail shall be digitally signed by the competent authority and bouncing of the electronic mail shall not constitute valid service. (2) In case of failure to serve a summons or notice through any one of the modes provided under sub-regulation (1), the summons or notice may be affixed on the outer door or some other conspicuous part of the premises in which the person resides or is known to have last resided, or carried on business or personally works, or last worked, for gain and a written report thereof shall be prepared in the presence of two witnesses. (3) In case of failure to affix the summons or notice on the outer door as provided under sub-regulation (2), the summons or notice shall be published in at least two newspapers, one of which shall be in an English daily newspaper having nationwide circulation and another shall be in a newspaper having wide circulation published in the language of the region where that person was last known to have resided or carried on business or personally worked for gain. |
In the existing provisions, manner of service of summons and notices issued by the Board was not provided, instead reference was drawn to the regulation 22 of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002. However, vide this amendment, specific procedure is added in the regulations. |
| 11 |
Substitution: Regulation 12 i. in sub-regulation (1), the words and symbols “the provisions contained in sub-sections (1), (2), (2A) and (3) of section 11 and section 11B of the Act” shall be substituted with the words and symbol “any action under the securities laws or directions or circulars issued thereunder”; ii. in proviso to sub-regulation (1), the words and symbols “(Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002” shall be replaced with the words and symbols “(Intermediaries) Regulations, 2008”. |
Self-explanatory. |
Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.
The author can also be reached at [email protected].
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 25th January, 2022
SECURITIES AND EXCHANGE BOARD OF INDIA
(PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO
SECURITIES MARKET) (AMENDMENT) REGULATIONS, 2022
No. SEBI/LAD-NRO/GN/2022/71.—In exercise of the powers conferred under Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, namely: –
1. These regulations may be called the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2022.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, –
I. In regulation 2, sub-regulation (2) shall be substituted with the following, namely–
“(2) The words and expressions used and not defined in these regulations but defined in the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Depositories Act, 1996 (22 of 1996), the Companies Act, 2013 (18 of 2013), or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those acts, rules or regulations made thereunder or any statutory modification or re-enactment thereto, as the case may be”.
II. In regulation 4, in sub-regulation (2), clause (k) shall be substituted with the following, namely–
“(k) disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading in a reckless or careless manner and which is designed to, or likely to influence the decision of investors dealing in securities;”
III. In regulation 6,
i. in clause (2), after the words “has been conducting” and before the words “in violation of”, the words “its activities” shall be inserted;
ii. in clause (4), the words “one month which may be extended upto a period of” and the words “by the Board” shall be omitted;
iii. after clause (6), the following new clauses shall be inserted, namely–
“(7) to call for information and record from any person including any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation;
(8) to make an application to the Judge of the designated court in Mumbai as notified by the Central Government for an order for the seizure of any books, registers, other documents and record, if in the course of investigation, the Investigating Authority has reasonable ground to believe that such books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted;
(9) to keep in his custody the books, registers, other documents and record seized under these regulations for such period not later than the conclusion of the investigation as he considers necessary and thereafter to return the same to the person, the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person from whose custody or power they were seized:
Provided that the Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof;
(10) save as otherwise provided in this regulation, every search or seizure made under this regulation shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures made under that Code.”
IV. Regulation 7 shall be omitted.
V. In regulation 8,
i. in sub-regulation (1),
a. the words and figure “under regulation 7” shall be substituted with the words and figure “under regulation 5”;
b. in clause (b), the words and figure “or regulation 7” shall be omitted;
ii. in sub-regulation (3),
a. in clause (a), after the words “Investigating Authority” and before the words “ to have access”, the words “or any person authorized by him in this behalf” shall be inserted;
b. in clause (b), after the words “Investigating Authority” and before the words “reasonable facilities”, the words “or any person authorized by him in this behalf” shall be inserted;
c. clause (c) shall be substituted with the following, namely–
“(c) provide to such Investigating Authority or any person authorized by him in this behalf any such books, accounts and records which, in the opinion of the Investigating Authority, are relevant to the investigation or, as the case may be, allow the Investigating Authority or any person authorized by him in this behalf to take computer print-outs thereof.”
VI. In regulation 11, sub-regulation (2) shall be substituted with the following, namely–
“(2) Any final order passed under sub- regulation (1) shall be put on the website of the Board.”
VII. Regulation 11A shall be substituted with the following, namely–
“Manner of service of summons and notices issued by the Board.
11A. (1) A summons or notice issued by the Board under these regulations shall be served on the person through any of the following modes, namely—
(a) by delivering or tendering it to that person or his duly authorised agent; or
(b) by sending it to the person by fax or electronic mail or electronic instant messaging services along with electronic mail or by courier or speed post or registered post:
Provided that the courier or speed post or registered post shall be sent to the address of his place of residence or his last known place of residence or the place where he carried on, or last carried on, business or personally works, or last worked, for gain, with acknowledgment due:
Provided further that a summons or notice sent by fax shall bear a note that the same is being sent by fax and in case the document contains annexure, the number of pages being sent shall also be mentioned:
Provided further that a summons or notice sent through electronic mail or electronic instant messaging services along with electronic mail shall be digitally signed by the competent authority and bouncing of the electronic mail shall not constitute valid service.
(2) In case of failure to serve a summons or notice through any one of the modes provided under sub-regulation (1), the summons or notice may be affixed on the outer door or some other conspicuous part of the premises in which the person resides or is known to have last resided, or carried on business or personally works, or last worked, for gain and a written report thereof shall be prepared in the presence of two witnesses.
(3) In case of failure to affix the summons or notice on the outer door as provided under sub-regulation (2), the summons or notice shall be published in at least two newspapers, one of which shall be in an English daily newspaper having nationwide circulation and another shall be in a newspaper having wide circulation published in the language of the region where that person was last known to have resided or carried on business or personally worked for gain.”
VIII. In regulation 12,
i. in sub-regulation (1), the words and symbols “the provisions contained in sub-sections (1), (2), (2A) and (3) of section 11 and section 11B of the Act” shall be substituted with the words and symbol “any action under the securities laws or directions or circulars issued thereunder”;
ii. in proviso to sub-regulation (1), the words and symbols “(Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002” shall be replaced with the words and symbols “(Intermediaries) Regulations, 2008”.
AJAY TYAGI, Chairman
[ADVT.-III/4/Exty./607/2021-22]
Footnotes:
1. The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 was published in the Gazette of India on July 17, 2003 vide No. S. O. 816(E).
2. The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 was amended on –
i. April 23, 2007 by the Securities and Exchange Board of India (Manner of Service of Summons and Notices Issued by the Board) (Amendment) Regulations, 2007 vide No. SEBI/LAD/DOP/ 2232/2007;
ii. December 11, 2012 by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2012 vide No. LAD-NRO/GN/2012-13/25/5455;
iii. September 06, 2013 by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/22/22670;
iv. December 31, 2018 by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018 /56.
v. March 13, 2020 by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/08.
vi. October 19, 2020 by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Second Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/36.
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