Sebi Revises Norms for Recovery of Investors’ Money

Markets regulator Sebi has put in place revised norms for recovering of investors’ money, wherein a registered insolvency professional will be appointed as administrator to undertake sale of assets.

The regulator has revised the procedures to be followed for refunding the investors’ money pursuant to failure of complying with disgorgement or refund orders passed by it.

In case an entity is not traceable or is not complying with Sebi directions, the recovery officer can appoint an administrator for the purpose of selling the properties attached, the regulator said in a notification dated October 3.

Only an entity registered with the IBBI as insolvency resolution professional would be considered eligible for appointment as administrator.

The Insolvency and Bankruptcy Board of India (IBBI) is implementing the Insolvency and Bankruptcy Code.

Under the norms, no person will be appointed as an administrator where such an appointment may be objected to on the grounds that give rise to justifiable doubts as to the independence or impartiality of such a person.

Any question involving issues of conflict of interest in the appointment of an administrator will be decided by the recovery officer.

“The administrator shall provide an undertaking to the board of absence of any conflict of interest with the defaulter, its directors, promoters, key managerial personnel and its group entities,” the regulator noted.

The expenses pertaining to the administrator would be borne by the defaulter or come from the sale proceeds of the entity’s assets.

According to Sebi, the terms and conditions of appointment including remuneration will be specified on case to case basis, after taking into consideration the quantum of work, the number of investors and the quantum of money involved.

While discharging the functions, the administrator can appoint an independent chartered accountant to verify the details of money raised, including payment already made to investors.

The norms would be applicable in relation to recovery of disgorgement amount ordered by the markets regulator.

In case the proceeds realised by way of sale of properties of the defaulter is in excess of the money due, the excess money will be paid to the defaulter after completion of three years from the date of completion of the refund process.

The new regulations Sebi (Appointment of Administrator and Procedure for Refunding to the Investors) has come into effect from October 3.