Legislation UpdatesNotifications

Securities and Exchange Board of India (SEBI), vide circular dated 06-06-2018, SEBI, has, inter alia:

  1. brought to the notice of SEBI registered market intermediaries the various notifications issued by the Government of India on Prevention of Money Laundering Rules, relating to making Aadhaar number issued by the Unique Identification Authority of India (UIDAI) and Permanent Account Number (PAN) or Form No. 60, as defined in Income Tax Rules, 1962 mandatory for both new and existing accounts with financial market intermediaries including securities market intermediaries.
  1. SEBI has further clarified in the above mentioned circular that in case PAN is not submitted by any client at the time of opening of account based relationship, one certified copy of an “officially valid document” (OVD) shall be submitted. However, for securities market, in terms of SEBI circular dated 27-04-2007, the requirement of PAN would continue to be mandatory for completing the KYC process.

To regulate the transactions between clients and brokers, SEBI has further, vide circulars dated 12-07-2018 and 27-08-2003, inter alia, mandated that:

  1. Brokers and sub-brokers should not accept cash from the client for purchase of securities and / or give cash against sale of securities to the clients.
  1. Further, it has been mandated that all payments shall be received / made by the stock brokers from / to the clients strictly by account payee crossed cheques/ demand drafts or by way of direct credit into the bank account through electronic fund transfer, or any other mode permitted by the Reserve Bank of India.
  1. In the case of securities also, giving / taking delivery of securities in “demat mode” should be directly to / from the “beneficiary accounts” of the clients except delivery of securities to a recognized entity under the approved scheme of the stock exchange and / or SEBI.

SEBI, had previously vide circular dated 27-04-2007, mandated that PAN would be the sole identification number for all participants transacting in the securities market, irrespective of the amount of transaction.

Schedule VII of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, inter alia, states that:

  • For registration of transfer of securities, the transferee(s) as well as transferor(s) shall furnish a copy of their PAN card to the listed entity.
  • For securities market transactions and/or for off-market or private transactions involving transfer of shares in physical form, the transferee(s) as well as transferor(s) shall furnish copy of PAN card to the listed entity.

Moreover, SEBI registered intermediaries are required to follow stringent KYC norms on an ongoing basis and are also required to file Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit (FIU) in case of suspicious activities of their clients.

Appropriate action against evasion of taxes/black money, including against cases involving black money investments, is an on-going process. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of taxes, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable. The Income-tax Department does not maintain sector-wise details of the searches conducted.

Ministry of Finance
Case BriefsTribunals/Commissions/Regulatory Bodies

Central Information Commission: The appellant had approached the CIC praying to recognize the Special Investigation Team (SIT) on black money of the Department of Revenue (Ministry of Finance) as a ‘public authority’ within terms of Section 2(h) of the RTI Act, 2005 along with a direction to the authority to appoint a CPIO.

The appellant submitted that clause (h) of Section 2 is clear enough to state that any body or authority constituted by a notification issued by the appropriate government would be a “Public Authority” for the purpose of implementing the RTI Act while placing before the Commission the fact that the SIT was constituted by a notification of the Government of India vide number F. No. 11/2/2009- Ad. E.D. dated 29.05.2014. It being a multi-member body comprising of a Chairman, a Vice-Chairman and 10 other members, the SIT clearly met both the criteria under Section 2(h)(d) of the RTI Act, 2005 namely that it is a “body” for the purpose of the Section and that it had been constituted by the Central Government vide a notification, the appellant contended.

On hearing the contentions, the Commissioner Mr. Bimal Julka observed that it was very clear that the definition of “Public Authority” under Section 2(h) of the RTI Act, 2005 does not prescribe “performance of Public Duty” as one of the criteria for determining if an Authority is “Public Authority” or not, yet performance of such duty by the authority, cannot be undermined to not be considered as an important Public Duty by the SIT which qualifies as a Public Authority as per the tests laid down in the first part to Section 2(h)(d) of the RTI Act.

The Commission finally held that Special Investigation Team on black money is a ‘public authority’ as per the Right to Information Act observing that when a public authority is largely funded by the government and performs the duty of bringing back unaccounted money kept unlawfully in bank accounts abroad, it is undoubtedly performing a public duty and therefore, every citizen of the country has the right to know about its functioning within the Act’s framework and as per its purpose. Accordingly, the authority concerned was directed to appoint a CPIO for SIT. [Venkatesh Nayak v. CPIO & DCIT (OSD),  (Inv. 1), Ministry of Finance, 2017 SCC OnLine CIC 1508, decided on 10.10.2017]