Sebi clamping down on illegal money pooling schemes

Capital markets watchdog Securities and Exchange Board of India is in process of cracking its whip soon on various illicit money-pooling schemes in West Bengal, which has already seen regulatory actions against some entities linked to Saradha and Rose Valley groups.

According to sources, those currently under scanner also include entities directly or indirectly linked to Saradha and Rose Valley groups, along with some other entities.

The regulator is also exercising its new powers like collection of information from other regulators, government departments and even commercial enterprises such as telecom companies and banks.

At the same time, Sebi is also looking into possible launch of recovery proceedings through attachment orders, among others, sources said.

The cases include illegal money pooling activities or ponzi schemes floated in West Bengal, Assam, other eastern and north-eastern states, among others.

With more powers getting restored through re-promulgation of ordinance last month, the Securities and Exchange Board of India is going ahead with prosecution and recovery proceedings in cases where wrongful

activities had already been established and orders passed.

The ordinance, re-promulgated for the third time, allows the regulator to enhance its own penalty against defaulters within three months and seek services of the police and central government officers in search and seizure operations.

The first ordinance was promulgated in July last year and was re-promulgated in September.

However, the second ordinance lapsed in mid-January after a bill to replace it could not be passed in Parliament.

Earlier when the ordinance was in force, Sebi had started more than 300 attachment proceedings in about 65 cases for the recovery of about Rs 2,000 crore (Rs 20 billion) from defaulters and fraudsters, including those who raised money through illicit money-pooling activities.

The ordinance vests with the Sebi various powers, including carrying out search and seizure operations and calling for information from banks, corporations, boards or any other authority.

It also allows the regulator to seek telephone call data records.

Sebi would have the power to increase the penalty on an erring entity within three months of passing an order provided the party concerned is given an opportunity to be heard in the matter.