SEBI Plans To Create ‘Difficult To Recover’ Category For Defaulters

Securities and Exchange Board of India (SEBI) is considering a proposal to create a ‘difficult to recover’ category for certain defaulters that will help prevent the regulator from devoting extra resources towards unproductive cases, as reported by Press Trust of India (PTI).

EBI is India’s apex regulator that was created “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.”

However, SEBI officials have noted that such classification will not impact the regulator's ability to undertake prosecution against the defaulters bracketed in the new category.

Though the regulator has launched recovery proceedings against many defaulters since 2013, the results have been less than satisfactory. This is because, in many cases, defaulters were either insolvent or financially unsound or with a company whose assets or directors/promoters were not traceable. Thus, there was a wastage in the optimal utilisation of SEBI's workforce and other resources.

It should be noted that out of the 1,600 defaulters who did not pay the penalties imposed on them by SEBI, while some owed the regulator small sums like Rs 15,000, the fines of others’ ran up to a few lakhs of rupees.

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