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SEBI gets teeth to probe new-age cases

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It can fine up to ₹10 cr. if a person tampers with information to obstruct probe, destroy data

The Finance Bill, 2019 has given the Securities and Exchange Board of India (SEBI) new powers to act against entities that tamper or destroy electronic databases or fail to furnish information when sought by the capital markets regulator, SEBI, who can now also impose penalties of up to ₹1 crore on brokers for certain violations.

These new powers assume significance as the regulator is in the midst of probing the leak of sensitive data through WhatsApp and also recently passed fresh orders on the National Stock Exchange (NSE) co-location matter, which had been challenged at the Securities Appellate Tribunal (SAT).

As per the Finance Bill, a new section — 15HAA — has been inserted in the SEBI Act that says if a person tampers with information to obstruct or influence an investigation, destroys regulatory data or tries to access data in an unauthorised manner then the entity could be penalised up to ₹10 crore or three times the unlawful gains, whichever is higher.

“For the purposes of this clause, a person shall be deemed to have altered, concealed or destroyed such information, record or document, in case he knowingly fails to immediately report the matter to the Board or fails to preserve the same till such information continues to be relevant to any investigation, inquiry, audit, inspection or proceeding, which may be initiated by the Board and conclusion thereof,” stated the Finance Bill.

WhatsApp case

Incidentally, the WhatsApp leak case or even the NSE co-location matter deal with the data being leaked through electronic means and unauthorised access to exchange data, which forms the base in most regulatory probes.

“The new section that has been inserted imposes penalty on unauthorised access to regulatory data and system databases though it is not yet clear whether ‘regulatory data’ and ‘database’ as mentioned in the section refers only to SEBI data or even those maintained by exchanges, depositories and clearing corporations,” said Sumit Agrawal, founder, RegStreet Law Advisors, while adding that this is important considering the fact that SEBI is dealing with matters such as the WhatsApp leak and the NSE matter.

The Centre has also explicitly allowed the regulator to impose a fine of up to ₹1 crore on brokers if they fail to issue a contract note to clients in the format as laid down by the exchanges. Earlier, only the lower limit of ₹1 lakh was prescribed