MUMBAI: To ensure that fraudulent money- pooling investment schemes are nipped in the bud, capital markets watchdog Sebi has called for stronger coordination among regulators and law enforcement agencies at the ground level.

“One area where lack of coordination (among regulators and other agencies) has been exposed very badly is at the ground level, at the district level, at the state level. This has been exposed by the mushrooming of illegal CIS schemes,” Sebi Chairman UK Sinha said.

There have been a number of cases in past few years of entities raising huge amounts of money from gullible investors through illegal CIS (Collective Investment Scheme) activities, many of which later faced crackdown by Sebi whose powers have been now enhanced to address this menace.

“If there was a better coordination at the state level, then many of these schemes would not have been able to grow beyond a certain size at the least, and either the state government’s economic offence wing, or the Ministry of Corporate Affairs, or RBI or Sebi, or IRDA, or any other agency would have caught them,” Sinha said in an interview.

The Sebi chief said the coordination among regulators has improved substantially at the senior level in last couple of years, but a stronger mechanism is required to facilitate coordination at the lower levels.

Listing out the steps being taken in this regard, Sinha said that “a coordination mechanism at state levels has been set up as per the advice of the Finance Ministry and they are supposed to meet every quarter”.

Sebi chairman further said this initiative has started bearing fruits and meetings are being held regularly in various states including Jharkhand, West Bengal, Bihar and Assam.

These states have seen a large-scale mushrooming of illegal investment schemes, many of which are in the nature of ponzi funds where investors are initially given huge returns from the money collected from new investors and then later on the operator vanishes leaving all investors in lurch.

“Because of these meetings, information is being shared among the regulators and other agencies. For example, we from Sebi may have some set of information, while representatives from non-banking finance companies and even media also bring their own information to the table and then it is decided who is going to be assigned for the investigation.

“My view is that this is going to be very helpful,” he said.

“To sum up, the coordination mechanism at the senior level is very very good, but at the ground level, at the state-level, that coordination mechanism needs to be further strengthened in practical terms. Now, instructions are in place, we have to ensure that it happens,” Sinha said.


  1. says

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