Sebi ups crackdown on money-pooling frauds, 92 firms face axe

Markets ombudsman had asked 117 entities in 2014 to refund over Rs 60,000 cr to defrauded investors

Sebi's crackdown on illegal money pooling activities seems to be gaining momentum as the regulator has taken strict action against 92 firms so far in 2015 for fraudulently raising over Rs 2,000 crore from public.

However, the total amount raised by these entities through illegal Collective Investment Schemes (CIS) and unauthorised deemed public issues could be much higher, as Sebi mostly relied on disclosures made by the companies themselves and many of them are yet to make such disclosures.

The Securities and Exchange Board of India (Sebi) had asked as many as 117 entities in year 2014 to refund over Rs 60,000 crore to the defrauded investors.

An analysis of orders passed by Sebi in just about four months so far this year shows that the capital market regulator has taken action against 92 such companies, out of which at least 40 are based in West Bengal.

The quantum of funds raised by these 40 companies is estimated at over Rs 500 crore, as against the overall figure of nearly Rs 2,011.60 crore mobilised by the total 92 firms.

Out of the 92 orders passed this year, at least 71 are against the companies having raised public money by issuance of securities such as debentures and preference shares without complying with the necessary regulatory laws, as per an analysis of directions passed by the regulator.

Together, these companies are estimated to have raised close to Rs 837 crore from investors.

In cases of illegal CIS also, the market watchdog has passed orders against at least 21 companies that allegedly raised 1,175 crore. However, amounts raised by many of these firms is not known.

These firms were running CIS without obtaining registration from Sebi and had raked in unauthorised funds promising high returns to investors.

A large number of the schemes were also carried out under the garb of real estate business.

In most cases, the regulator has passed interim orders prohibiting the companies from mobilising further funds till further directions. In other cases, final orders have been passed while directing the companies concerned to refund money to the investors within stipulated time periods.

Sai Prasad Foods, Sai Prasad Properties, HBN Dairies & Allied Limited and Mega Mould India Limited are some of the firms asked to refund investor money.