Sebi steps up ponzi clampdown; cracks whip on 10 in a month

  • PTI, New Delhi
  • Updated: Jul 27, 2014 13:49 IST

To protect the public from fraudulent money-pooling activities, Sebi has stepped up action against entities raising funds illegally, even as it awaits Parliamentary nod for greater powers to check such frauds.

So far in the current fiscal, beginning April 1, at least 28 firms have faced Sebi's wrath for raising funds totalling at least Rs 2,500 crore through illegal money-pooling schemes or unauthorised issuance of securities, out of which orders have been passed in 10 cases during this month itself.

The action against these companies incidentally coincided with recovery and attachment proceedings against hundreds of entities during the recent months against those having refused to pay the penalties and other dues to Sebi as per the capital market regulator's earlier orders.

The Securities Laws (Amendment) Bill, 2014, which would empower Sebi to crack down on ponzi schemes and investment frauds, was approved by the Cabinet last week and the bill would now go to the Parliament.

The Bill seeks to give Sebi sweeping powers like attachment of properties, launch of recovery proceedings, seeking call data records to investigate cases and ordering search and seizure against manipulators and fraudsters.

The previous government had sought to empower Sebi through an ordinance, which was promulgated thrice. However, the ordinance could not be passed by the Parliament in time.

Using the powers given through this ordinance, Sebi launched close to 1,500 attachment proceedings in more than 400 different cases. Of these, Sebi also managed to recover funds in many cases and attachment orders against them were subsequently withdrawn, while search and seizure operations were also conducted in a few cases.

Out of the 28 orders passed so far in 2014-15, at least 15 are against the companies having raised public money by issuance of securities such as debentures and preference shares without complying with the necessary regulatory laws, as per an analysis of directions passed by Sebi.

Together, these companies are estimated to have raised close to Rs 1,500 crore from investors.

In most cases, the regulator has passed interim orders prohibiting the companies from mobilising further funds till further directions. In other cases, final orders have been passed while directing the concerned companies to refund money to the investors within stipulated time periods.

In cases of illegal Collective Investment Schemes (CIS) also, the market watchdog has passed orders against at least 13 companies, including some with operations in West Bengal.

Among these, five firms cumulatively garnered over Rs 900 crore. The money raised by others could not be ascertained.

In the current month itself, Sebi has passed orders against at least 10 firms, of which six were found to be involved in pooling money through issuance of securities. Four others were found to have been running Collective Investment Schemes (CIS).

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