Finmin seeks change in SEBI Act for managing investor protection fund

Mumbai: The finance ministry will seek cabinet clearance of the Securities and Exchange Board of India (SEBI) Amendment Act for setting up an investor protection fund (IPF).

The proposed amendment would allow market regulator SEBI to utilise money collected in the investor protection fund by way of fines and penalities from listed companies and brokers who indulge in violation of market regulator's guidelines.

"We are preparing a note on IPF that will be put up before the cabinet to get its nod for amending the SEBI Act. The amendment is expected to be introduced in the next session of Parliament," a senior finance ministry official said.

Till now the fines and penalities that are collected go into the Consolidated Fund of India and without an amendment to SEBI Act, the market regulator would not be able to use them for investor protection and education, he said.

Funds collected through disgorgement would also go to IPF although the money to be collected through the recent disgorgement order of SEBI would not go to the fund, as it was not supposed to be operational from retrospective effect.

The bill to amend the SEBI Act would be introduced either in the current session or the budget session of Parliament.

SEBI had proposed the amendments mostly in line with the Securitisation Act of the US. As part of a parliamentary process, the bill is likely to be referred to a parliamentary subcommittee after introduction. A ministerial committee is already considering the bill.