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Sebi declares illegal money pooling as 'fraudulent'

PTI  Mumbai, August 12, 2013
First Published: 21:53 IST(12/8/2013) | Last Updated: 21:54 IST(12/8/2013)

To curb rising instances of public getting defrauded by money pooling schemes, capital market regulator Sebi today decided to declare illegal mobilisation of funds as a "fraudulent and unfair trade practice".


Besides, the Securities and Exchange Board of India (Sebi) has clarified that the existing list of activities coming under fraudulent and unfair trade practices can be further expanded whenever the need arises.

The decisions were taken by the Sebi board during its meeting in Mumbai on Monday.

Following today's decision, all activities of money mobilisation through unauthorised Collective Investment Schemes (CIS) would face stronger penalties prescribed under the revised Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations.

The board has approved the "proposal to declare illegal mobilisation of funds without obtaining a certificate under the Sebi (Collective Investment Schemes) Regulations, 1999 as a fraudulent and unfair trade practice," according to an official release.

"This amendment has been made to impose deterrent adjudication penalties on unregistered CIS entities mobilising money," the release said.

The latest move comes against the backdrop of rising instances of fraudulent money pooling activities, including by a number of West Bengal-based groups such as Saradha, Rosevalley and Sumangal.

There have been also many innovative but illegal fund-raising schemes in the name of emu farming, goat rearing, cattle and butter, and holiday memberships.

Sebi has already got stronger powers to deal with all kinds of money pooling activities, including by unlisted companies, involving Rs. 100 crore or more.

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