SEBI Gets back Teeth to act Against Ponzi Schemes

Finally, the capital market regulator, the Securities and Exchange Board of India (SEBI), has got back the power to act against ponzi schemes, illegal deposit schemes and assess call data records in securities-related offences, besides others.

This has happened after the Finance Ministry managed to get the nod of the Election Commission and Cabinet on re-promulgation of the SEBI Ordinance and finally from the President. This Ordinance lapsed on January 17 after the Government failed in getting the Securities (laws) Amendment Bill passed in the monsoon, winter and extended winter session of the 15th Lok Sabha, which was adjourned sine die on February 21 and finally prorogued.

Confirming the latest development, a senior Government official said though action taken on the basis of the previous Ordinance has legal cover, “still, as a matter of precaution, validity clause has been added just to be doubly sure about the action,” he said. The Ordinance talks about compulsory registration with SEBI for pooling of money over ?100 crore. The regulator gets power for search, seizure, attachment and recovery.

Although a section of Government officials felt that the Ordinance could not be done now as it would raise proprietary issues, another group of officials did not think so, as they felt that there was no new move involved. The hopeful officials also said there have been recent cases of illegal deposit/investment schemes and there action by SEBI needs enhanced power through Ordinances.

Just last month, initial investigations by the CBI revealed an alleged scam to the tune of ?45,000 crore (approx.) in a case relating to alleged fraud by a Delhi-based private company and others by raising investments from over 5 crore gullible investors through a collective investment scheme under the garb of the sale and development of agricultural land.

On Saturday thousands of duped investors reportedly took to the streets in Siliguri (West Bengal) protesting against chit fund companies in the State. Just few days back, West Bengal Consumer Affairs Minister Sadhan Pandey alleged that after a gap of more than a year, chit fund companies have started reappearing in West Bengal, especially in the rural areas. It may be recalled that the Same state witnessed the infamous Sardhaa chit fund scam, in which which lakhs of people were cheated of their hard-earned savings running into more than ?2,000 crore. 

Business Line, New Delhi, 31-03-2014