Sebi to start recovery proceeding with new powers

To go after old cases; MCA too readies plan to crackdown on CIS

The new law, empowering the market regulator to attach properties and recover monetary penalties from violators, has been the most important power granted so far, Securities and Exchange Board of India (Sebi) Chairman U K Sinha said on Wednesday.

The Centre, last week, issued an ordinance to give more powers to Sebi to crack down on illegal collective investment schemes (CIS) and other defaulters.

Speaking for the first time after getting new powers, the Sebi chief said the ordinance armed it with the power to go after old cases where the regulator had passed an order but was not able to recover the money. Sinha pegged this amount at just Rs 125 crore.

Earlier, Sebi had faced difficulties ensuring that companies refunded the funds they had collected from the public through illicit schemes.

“One problem we were facing earlier was that even if we passed orders against a particular company, which raised money from the market, we could ban it, but couldn’t recover the money. Those powers are now with Sebi,” Sinha said here at an investor education programme.

Sachin Pilot, union minister of state for corporate affairs, said Sebi now has been given charge to tackle companies doing CIS activities.

“When companies are not following the law and are collecting money by dubious means, then we must take action. Sebi has been given powers now to take action against CIS,” he said.

Pilot added that the priority of the corporate affairs ministry, state governments and other regulators would be to recovery money from fraudsters to repay it to investors, which he said was possible by the use of technology and information sharing by all the agencies.

“The priority should be to recover money. There is no point catching people who have swindled the money. It's important to seize those assets which are ill-gotten so that the poorest of the poor investor, who had invested his/her hard-earned money, is repaid,” said the minister.

Exploiting regulatory gaps, more than 600 entities have operated unauthorised CIS without proper registration. Sebi has been able to launch criminal prosecution in more than 550 cases. It has been able to book the accused in 138 cases.

It has passed orders in the case of 15 entities, some of them include Maitreya Services, NGHI Developers India Limited and Alchemist Infra Realty.

Meanwhile, the corporate affairs ministry is looking to spread investor awareness and education by greater use of social and electronic media to create awareness among investors.

M J Joseph, additional secretary, said the ministry had started tapping various platforms, including the visual media, to sensitise investors to fraudulent investment schemes.

“Bulk SMSes on investor awareness are being sent. Ticker messages in English and Hindi are being displayed on Doordarshan News channel,” he said.

The ministry plans to tap additional platforms such as the post office and the internet.

“To reach out to rural areas, the department of posts will shortly be printing cautionary messages on the back of post office passbooks. Starting August 1 Google India’s Ad Word facility will start displaying pop-up investor awareness messages on its search engine,” he added.