The Securities and Exchange Board of India has urged the Centre to set up a ‘single regulator’ to monitor companies, which raise public funds in lure of high returns.
According to SEBI Chairman U.K. Sinha, a number of investors, particularly in the eastern parts of the country, were getting into schemes which were “not legal”.
“We have requested the government to have a new set of laws, providing for a single regulator for such companies,” Sinha said at an interactive session organised by the Confederation of Indian Industry here on Tuesday.
Expressing concern over schemes offered by some of these companies, Sinha said, “Investors are getting into schemes which promise doubling of returns in 3-4 years. These companies also offer commission as high as 15-25 per cent to agents. No legitimate business activity can provide this kind of return.”
Loopholes
There were some loopholes in the existing regulation which needs to be “plugged” to curb the mushrooming of such deposit-taking companies.
“In the 1999 regulation, some exemptions were provided to chit funds and co-operative societies among others. However, we are noticing that people are taking advantage of these exemptions. There are loopholes and government should plug those,” he said.
There might come a time when investors might not be able to get their money back. “It is a worrying situation so we have asked government to take measures and set up one regulator. It could be SEBI or anybody else,” he said.
Awareness Campaign
The market watchdog also plans to roll out an investor awareness campaign to educate investors. “A large number of people are subscribing to such schemes; it can be quite risky. We plan to start investor awareness campaign,” he said.
SEBI, Sinha said, has also initiated legal proceedings against various such companies.
The capital market regulator, had, earlier instructed Kolkata-based MPS Greenery Developers Ltd and Rose Valley Real Estate and Constructions to wind up their Collective Investment Schemes (CIS) and refund the money to investors.