FM proposes comprehensive central law to check ponzi menace

To check the ponzi menace, government today proposed to come out with a comprehensive central legislation to safeguard the public from getting defrauded by illicit deposit taking schemes.
"In the recent past, there have been rising instances of people in various parts of the country being defrauded by illicit deposit taking schemes. The worst victims of these schemes are the poor and the financially illiterate. The operation of such schemes are often spread over many States.
"I, therefore, propose to bring in comprehensive Central legislation in 2016-17 to deal with the menace of such schemes," Finance Minister Arun Jaitley said in the Budget 2016-17 speech.

Currently, Collective Investment Schemes (CIS) are regulated by Sebi and refer to pooling of more than Rs 100 crore from investors under any scheme or arrangement and which is not registered with capital markets regulator.
However, there is no comprehensive legal framework for all kinds of illicit money pooling schemes they are mostly governed by state-level laws.
Besides, any fund raising exercise involving 50 or more investors is considered as a public offering and therefore it is also regulated by Sebi.

However, there are many cases where companies claim to have raised funds from less than 50 investors and peg their total mop-up at below Rs 100 crore to avoid any regulatory glare.

Often such companies have been found to be raising money from public by misusing routes like non-convertible debentures and some other financial instruments.
The Securities Laws Amendment Act, which was notified by the government in August 2014, empowers Sebi to pass orders for attachment of properties, arrest of defaulters and to access call data records.