Explained: Why SEBI pegs dues of over $8 billion as difficult to recover

The Indian exchequer could be at risk of losing out on more than Rs 67,000 crore that was due to it. This could happen if the market regulator, the Securities and Exchange Board of India (SEBI), fails to recover dues worth Rs 67,228 crore (about $8.1 billion), which it deems “difficult to recover (DTR).”

Defining DTR, SEBI said these dues are the ones which could not be recovered even after exhausting all the modes of recovery.

A report by the Press Trust of India (PTI) has said that SEBI has segregated dues to the tune of Rs 67,228 crore under "difficult to recover" category at the end of March 2022.

How much money does SEBI have to recover overall?

Overall, the regulator has dues worth Rs 96,609 crore ($11.7 billion) that needs to be recovered from entities, including those that failed to pay the fine imposed on them, failed to pay fees due to markets watchdog and did not comply with its direction to refund investors' money, according to Sebi's annual report for 2021-22.

Which companies owe SEBI a bulk of the money?

Out of Rs 96,609 crore, the regulator said that Rs 63,206 crore, which is 65 per cent of the total, pertains to collective investment schemes and deemed public issues of PACL Ltd and Sahara Group company Sahara India Commercial Corporation Ltd.

Are there any other processes that need to be gone through to recover the money?

Yes, Rs 68,109 crore, amounting to 70 per cent of the total dues, is subject to parallel proceedings before various courts and court-appointed committees. In these cases, SEBI's recovery proceedings are subject to directions of respective courts or committees.

What does SEBI say about whether it can recover the money in the DTR category?

SEBI has tried to paint an optimistic picture. It has said that segregation of such DTR dues is purely an administrative act and this will not preclude the recovery officers from recovering the amount so segregated as DTR as and when there is a change in any of the DTR parameters from the recovery point of view.

How many cases did SEBI take up in 2021-22?

The markets watchdog took up as many as 59 new cases, pertaining to flouting securities law, for investigation during 2021-22, which is way lower than 94 cases taken up in the preceding financial year.

"During 2021-22, 59 new cases were taken up for investigation and 169 cases completed in comparison to 94 new cases taken up and 140 cases completed in 2019-20," the report noted.

The cases were related to alleged violation of securities law, including market manipulation, price rigging and insider trading.

Of the total 59, as many as 38 cases taken up for investigation were related to market manipulation and price rigging; 17 cases for insider trading and the remaining four pertained to other violations of securities law.

During 2021-22, the regulator initiated enforcement action in 176 cases while it disposed of 226 cases. At the end of March 2022, 426 cases were pending for action.

When does SEBI typically initiate a probe?

SEBI initiates investigation based on reference received from sources such as its integrated surveillance department, other operational departments and external government agencies.

"The purpose of the investigation is to gather evidence and to identify persons/ entities behind irregularities and violations so that appropriate and suitable regulatory action can be taken, wherever required," the annual report noted.

What are the various steps involved in a SEBI investigation?

The steps involved during the investigation process include the analysis of market data like order and trade log, transaction statements and exchange report.

Among others, SEBI also analysed bank records like account and KYC details, information about a firm, call data records and information obtained from market intermediaries during the investigation process.

After completion of an investigation, the watchdog said, penal action was initiated wherever violations were noticed.