The government has accorded more powers on the market regulator Sebi to crackdown on ponzi schemes, which in recent months have killed many and robbed millions of their pennies, by allowing it to access phone call records to check insider trading and carry out search and seizure operations.
President P Mukherjee Thursday gave his consent to the Ordinance amending the Securities Act, within a day of the Cabinet approving the proposal to give more powers to Securities and Exchange Board (Sebi). There have been reports from almost every state about many shades of ponzi schemes revolving around many – from the Austrailian emu birds, art funds, time-share funds, goat, cattle and potato farming schemes to solar farms to many a sheer vanilla savings scheme offering huge returns. The latest is the solar farm scandal in the so-called most literate state Kerala, where the very chief minister’s survival is under threat as many of his personal staff are involved in the same that offered solar farms for a as low an investment like Rs 10 lakh.
However, it has to be noted that the biggest of all is the Rs 24,000 crore fraudulent fund rasing by one of the largest money-sharks in the country—the Sahara group, which luckily is facing the wrath of the Supreme Court now. "The government believes that these amendments would give the watchdog the legal backing to clamp down on unscrupulous entities that are using newer methods to take gullible investors for a ride," an official statement said.
Amid rising criticism that enough is not being done to curb ponzi schemes, the government said, "the promulgation of the Ordinance demonstrates the commitment and resolve of the government to act with speed and alacrity to curb irregularities and frauds in securities market". As per the amended law, Sebi can regulate any money pooling scheme worth Rs 100 crore or more and attach assets in cases of non-compliance, it said, adding the Sebi chairman would have the authority to order "search and seizure operations".
The market watchdog, the statement said, would now have powers to seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being investigated by it. The Ordinance allows setting up of special courts to speed up Sebi related cases. "Establishment of special courts enabled by this Ordinance would fast-track the resolution of pending Sebi related cases," the statement said.
The amendments would clear the air over regulatory gaps and overlaps with regard to types of instruments used in raising funds. "Owing to new and innovative methods of raising funds from investors, such as art funds, time-share funds, emu /goat farming schemes, there has been regulatory gap/overlap regarding types of instruments/ fund raising," the statement said. Even though collective investment schemes come under the purview of Sebi, the regulator receives complaints against illegal fund raising activities of certain companies that claim they do not fall under the CIS regulations.
"With the amendments in force now, Sebi would have powers to regulate any pooling of funds under an investment contract involving a corpus of Rs 100 crore or more, attach assets in case of non-compliance and the Sebi chairman would have powers to authorise the carrying out of search and seizure operations, as part of efforts to crack down on ponzi schemes," it said. Massive public outrage was witnessed in the wake of recent chit funds scam perpetrated by Kolkata-based Saradha group that defrauded thousands of investors of their hard earned money.
These amendments to the Sebi Act, SCR Act and the Depositories Act were finalised after detailed consultations with Sebi and other ministries and departments including home, telecom, corporate affairs and finance, among others
