In order to avoid a repeat of Saradha kind incidences, regulatory agencies have formulated a three-pronged strategy in association with State Governments to curb the menace of fraudulent and ponzi schemes.

“This involves state level depositor protection Act, state level co-ordination for exchange of information and new provisions under SEBI Act,” SEBI Chairman UK Sinha told reporters after inaugurating BSE's new Investors Service Centre here on Saturday.

This centre aims to help investors in redressing their grievances related to share trading of a particular company.

Sinha informed that 20 States and Union Territories have already enacted Depositor Protection Act while 6 States and Union Territories are awaiting Presidential assent. This Act empowers District Magistrate to act upon complaint against any entity. The officer can enter any premises inspect, attach property (personal and occupied through illegal gains), arrest the accused beside disgorgement. Disgorgement allows an authority to distribute illegally accumated money among affected people.

In line with the decision by the Financial Sector Development Council (FSDC, headed by the Finance Minister), in many States, State level Co-ordination Committees for exchange of information on fraudulent fund-raising have started working.

The Chief Secretary heads the committee which has officers from SEBI, RBI and other regulatory authorities and investigating agencies.

SEBI Act provisions

The third component is provisions of new SEBI Act. Now, it is mandatory to register money pooling scheme that collects Rs 100 crore or more with SEBI. However, “If the money collecting agency is already registered with any regulatory agency, it will not have to register again with SEBI. Of course, if we get any complaints against that particular company, we will forward that to the related regulator,” Sinha said.

Talking about ​the ​Collective Investment Scheme, he said even after ​the ​amendment in SEBI Act​ clearly defining CIS, not a single company came ​forward ​for registration between 2000 and 2014. ​Also, despite clarifying that registration will require simple safeguards,​ such as ​the ​composition of board, appointment of independent directors and so on, ​no ​company came​ forward for registration​. “This clearly ​shows that these companies (running illegal deposit​s​ or ​Ponzi schemes) did not want to follow ​any ​discipline,” Sinha said.

Highlighting the achievements related with protecting interest of shareholders, he said that World Bank, in its latest ‘Ease of Doing Business Report’, has ranked India at 7 in terms of protecting minority shareholders. “This is ahead of USA,” he said, “This happened because of regulations such as norms for related party transaction at board level and appointment of at least one director in the board.”

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