A large number of fraudulent schemes have come to the fore in recent months, wherein gullible investors are promised huge returns of up to 100 per cent in a year or two through 'bizarre and innovative' methods. The investors being taken for a ride include the poor daily-wage earners trying to save a few hundred rupees a month,the middle-class seeking to invest their hard-earned income for decent returns, as also the rich and sophisticated HNIs looking to grow their wealth by investing in property, artworks and the financial markets.
Investigations of Securities and Exchange Board of India (SEBI) have also found that many of these schemes are being used for the purpose of money laundering and to channelise illicit funds into the financial system. Many cases have come up in the eastern states of West Bengal and Assam, wherein huge returns are being promised on real estate and hospitality investments. Besides, many such schemes are there in the northern states of Delhi, Rajasthan, Haryana and Himachal Pradesh.
SEBI on its own lacks full-fledged powers to act against all kinds of 'money-pooling' frauds, although a proposal to strengthen its arsenal is awaiting government's clearance. Thus SEBI is joining forces with other agencies, including RBI, SFIO, Enforcement Directorate and state police departments, to tackle the menace.
Investigations of Securities and Exchange Board of India (SEBI) have also found that many of these schemes are being used for the purpose of money laundering and to channelise illicit funds into the financial system. Many cases have come up in the eastern states of West Bengal and Assam, wherein huge returns are being promised on real estate and hospitality investments. Besides, many such schemes are there in the northern states of Delhi, Rajasthan, Haryana and Himachal Pradesh.
SEBI on its own lacks full-fledged powers to act against all kinds of 'money-pooling' frauds, although a proposal to strengthen its arsenal is awaiting government's clearance. Thus SEBI is joining forces with other agencies, including RBI, SFIO, Enforcement Directorate and state police departments, to tackle the menace.
SEBI at present is also investigating a case wherein an organised syndicate of fraudsters is suspected to have defrauded a large number of people in the name of investments made by their deceased family members. The syndicate typically calls up the target investors to inform about a mutual fund or insurance product purchased by his or her deceased relatives and promises impressive returns if some fresh investments are made. In the process, fraudsters earn fat commissions for sale of mutual fund or insurance products.
Thus SEBI has sent a proposal seeking greater powers from the government for handling various investment frauds and misdoings. SEBI is also facing challenges in recovery of penalties, regulation of pooling of monies from public by various schemes. Besides, SEBI has also listed the lack of direct powers for attachment of assets, to conduct search and seizure and to call for information from any person in relation to its inquiry and investigations. As of now, SEBI mostly needs to seek relevant judicial or executive orders on case-to-case basis for such powers.
Consequently, SEBI has proposed that any pooling of funds under an 'investment contract' involving a corpus of Rs 100 crore and above should be deemed as Collective Investment Scheme under the SEBI Act. Besides, it has also sought powers to specify the parameters for determining as to what constitutes pooling of funds from public for the purpose of treating such schemes as Collective Investment Scheme. It is necessary to enhance SEBI’s powers to make it better equipped to deal with 'innovative' collective schemes that are designed to avoid regulation.
Thus SEBI has sent a proposal seeking greater powers from the government for handling various investment frauds and misdoings. SEBI is also facing challenges in recovery of penalties, regulation of pooling of monies from public by various schemes. Besides, SEBI has also listed the lack of direct powers for attachment of assets, to conduct search and seizure and to call for information from any person in relation to its inquiry and investigations. As of now, SEBI mostly needs to seek relevant judicial or executive orders on case-to-case basis for such powers.
Consequently, SEBI has proposed that any pooling of funds under an 'investment contract' involving a corpus of Rs 100 crore and above should be deemed as Collective Investment Scheme under the SEBI Act. Besides, it has also sought powers to specify the parameters for determining as to what constitutes pooling of funds from public for the purpose of treating such schemes as Collective Investment Scheme. It is necessary to enhance SEBI’s powers to make it better equipped to deal with 'innovative' collective schemes that are designed to avoid regulation.
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