While it'll be nothing but a season of politics from now till at least June, the inability of the legislature to function has effectively stripped SEBI of many of the new powers that it acquired last year to strike against ponzi schemes and to conduct search and seizures like other financial authorities. SEBI has obtained these powers that when the government had originally promulgated ordinance in July last year. By September, when the ordinance was lapsed, parliament had not passed the bill so the ordinance was re-promulgated. Now, on January 15th, the ordinance has lapsed again but it has not been re-promulgated again and has lapsed.
Technically, this lapse has happened because the winter session of the parliament is still on. In mid-February, the government plans to have a fifteen-day sitting under the winter session to pass the vote on account. While the session is still on, an ordinance cannot be re-promulgated.
As things stand, legal experts aver that even though actions that have been completed by SEBI under this law will stand, those that are still continuing cannot be pursued further. One of the triggers for this ordinance was the Saradha scam in West Bengal. As matters stood earlier, outfits like Saradha could wriggle out from under SEBI's jurisdiction by convincing a judge that they weren't a collective investment scheme of the kind that SEBI was authorised to regulate. Around the country, ponzi schemes have always operated by pretending to be real estate outfits, plantations, emu farms, and other businesses. I've even heard of a ponzi scheme pretending to be an engineering college. Under this ordinance, SEBI was able to enforce its authority on such schemes.
Meanwhile, SEBI Chairman UK Sinha also expressed his unhappiness at the situation, telling the media that, “After two rounds of ordinance, it could not be passed (by Parliament) and now, it has lapsed. This will have implications. Let us see how we proceed.” However, he did say that regulations passed under the ordinance would still be valid.
It's unfortunate that the government has allowed the ordinance to lapse. Of course, like everything else in Delhi nowadays, there's a conspiracy theory about this too. Apart from ponzi regulations, the ordinance's monitoring, search and seizure measures had been called draconian by many people. If you listen to the whispers, then you'll be told that there sudden upgradation of SEBI's powers had too many people uncomfortable.
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