Sebi's multi-pronged approach to curb illegal money pooling

Sebi chief U K Sinha on Saturday exuded confidence that a multi-pronged approach, including effective use of powers vested with it, would help control the menace of illegal money pooling schemes.

To clamp down on illegal money collecting activities or ponzi schemes, various efforts are being made at the state, Centre and regulatory levels.

The capital market watchdog now has powers to regulate illegal collective investment scheme where the amount involved is more than Rs 100 crore or Rs one billion.

Sinha said effective implementation of depositor protection law in the states, exchange of information at the state level and between various agencies, and Sebi's powers would help in controlling the menace of illegal money pooling activities. In recent times, many instances of investors getting duped by dubious investment schemes have come to light.

Referring to its powers to regulate collective investment schemes, the Sebi chief said, "I am sure if the provision was there earlier, we would not have had such incidents". In this regard to amend the Sebi Act, three ordinances were brought into effect before the Parliament cleared the proposal in August this year.

"The very fact that the government had to go for three rounds of ordinances indicate that there was something lacking in the law.... Ideally the government must not go for ordinance but government went for an ordinance.

"There were serious lacunae, deficiencies in the Sebi Act which were coming in the way of Sebi controlling the menace of unauthorised deposit taking activities," Sinha said.

He said that between 2000 and 2014, not a single entity got registered under the Collective Investment Scheme (CIS) regulations, which was introduced in 2000.

"There was complete lack of clarity about the role of various agencies, the state government and central government... It was very difficult to fix the responsibility on which agency will be looking into those cases. That was the real problem," Sinha said.

As part of tackling the menace, a State Level Coordination Committee (SLCC) has been set up and it meets once in a quarter. At this committee, various agencies also exchange information on illegal money pooling activities that have come to their notice.