Insider trading to come under PMLA ambit

Insider trading and market manipulation are being included in the Prevention of Money Laundering Act (PMLA) as ‘scheduled’ offences, a move that could result in stricter punishment for these crimes. Acting on suggestions from finance ministry officials, all offences covered under Section 12A of the SEBI Act, read with Section 24 of the SEBI Act, are being included in the PMLA schedule, government sources said. Offences related to human trafficking, smuggling of migrants, piracy and environmental crime are also being included in the law, they added. The revenue department has circulated an updated draft Cabinet note on the proposed amendments to PMLA to all departments concerned. A revised draft of the amendment bill, incorporating the latest proposals, has also been circulated for comment. It is understood that the draft note would be forwarded for Cabinet approval soon. Officials say the bill is scheduled to be introduced in Parliament during the ongoing session itself.
Punishment under PMLA—which also fulfils India’s global obligations—is far stricter than the penalty that offenders face under SEBI Act. The PMLA provides for attachment and seizure of property and records, besides imprisonment and penalty. Once the amendments to PMLA are legislated, overseas payment gateways, money changers and money transfer service providers have to face mandatory reporting obligations. As offences that have cross-border implications are being included in the PMLA, it was felt that market manipulation and insider trading should also be part of the inclusions. “The department (economic affairs) has suggested Chapter VA of Securities and Exchange Board of India Act, 1992 (i.e. Section 12A) for inclusion,” says a government document circulated to various ministries and departments for comment. The suggestion of department of economic affairs has been accepted and Section 12A of Securities and Exchange Board of India Act, 1992 (Prohibition of Manipulating and Deceptive Devices, Insider Trading and Substantial Acquisition of Securities and Control), read with Section 24 of Securities and Exchange Board of India Act, 1992, is proposed to be included in Part B of the schedule to PML Act,” the document adds. It is understood that the law ministry has already cleared the proposed changes. Finance minister P Chidambaram has also approved the amendments proposed in the updated Cabinet note, the sources said. The updated law would also have provisions to take action against those engaged in export of antiques and counterfeiting of currency, besides terrorism. Those who finance terror acts like bomb blasts can also be prosecuted under the updated law. While there are separate laws to deal with such offences, the new provisions will help the government to pin down those financing or amassing wealth by getting involved in such acts. For example, the department of industry policy & planning has been consulted for addition of some offences covered by the Explosives Act to the PMLA schedule. The finance ministry has also favoured coverage of human trafficking, counterfeiting, piracy, environmental crime and trafficking in stolen goods under the PMLA. The sources said North Block proposed inclusion of cross-border offences to the law schedule so that more stringent action can be taken and the government is enabled to track down offenders in anywhere.