 "Sebi")
The standing committee in the first week of November was in Mumbai where it met the markets regulator, Securities and exchange Board of India (Sebi), exchanges and banks to prepare a report on the financial markets.
One key observation made by the committee was the numerous ponzi schemes and that they end up falling under different regulators such as Sebi, Reserve Bank of India (RBI), Ministry of Corporate Affairs (MCA) and state governments.
"The lack of a comprehensive regulator leads to many of these schemes falling between regulatory gaps and this often results in people getting exploited," said a senior minister.
The committee noted that schemes such as gold scheme and Nidhi or Mutual Benefit Scheme fall under the regulatory purview of the Central Bank and MCA. On the other hand Multi Level Marketing (MLM), Ponzi schemes and schemes by cooperative societies are governed by State Laws. Only the collective investment schemes (CIS) face Sebi scrutiny.
"In order to effectively deal with the menace of unathorised and illegal money mobilization at an early stage many state governments have enacted state laws. For enactment of Protection of Interest Depositors' Act by all states and Union Territories, Sebi has written to ministry of Finance in June this year," Sebi informed the parliamentary committee in a meeting in the first week of November.
As per the latest figures, Sebi's precautionary act by way of passing prohibitory orders is far ahead of the recovery proceedings. In the past three years till September 2015 Sebi has passed 75 interim or prohibitory orders in the matters of CIS, with 51 orders being passed in 2014-15. During the same period final orders were passed in 32 cases with directions to refund the monies collected.
Sebi in the matter of CIS and Deemed Public Issues (DPI) has initiated recovery proceeding in nineteen cases and 105 attachment orders have been issued. The amount involved in these cases come to a whooping Rs 3,500 crore however, Sebi has so far been able to recover only Rs 2.80 crore of the said amount. Number of prohibitory orders stand at six in CIS and DPI related matters.
"It is to be clarified that unauthorized money pooling are falling under various regulators. Upon completion of examination of applicability of Sebi act, Sebi has referred 1438 cases to various agencies including state governments," Sebi officials informed the committee.
Sebi also informed the Committee that it has so far received references or complaints against 292 companies for carrying on activities of CIS.
"A nodal Department of the Central Government should compile updates on these cases and facilitate coordinated action with concerned agencies like Sebi, RBI, MCA and Department of Financial Services (DFS). Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Income Tax and the enforcement agencies from the concerned States may also be involved in this exercise," noted the Moily committee.
