Sebi cracks down on money-pooling frauds

In 2014, the agency directed 117 firms in 2014 to refund over Rs 60,000 cr to defrauded investors

New Delhi (PTI): With many listed companies failing to appoint at least one woman director on their boards, Sebi says the regulations are aimed at ensuring "gender diversity". Listed companies which did not comply with the directive of appointing at least one woman director by March 31 have been penalised. A minimum of Rs 50,000 fine will be levied from the non-compliant companies and more action will follow if things stay that way after six months. A senior Sebi official said the requirement of appointing women directors on the boards of companies is seen as a "gender issue".

The idea is about diversity on the boards of companies and ensures that more women directors are there, the official noted. Earlier this month, Sebi announced a four-stage penalty structure wherein fines will increase with the passage of time. The market watchdog has asked the stock exchanges to levy the fines as the violation relates to the Listing Agreement.Firms will have to pay only the monetary fine and can escape further regulatory action if they comply within next six months, i.e., till September 30.

Out of 92 orders passed, 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

The Sebi's crackdown activity on illegal money pooling firms 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 gullible 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.

Sebi had asked as many as 117 entities in year 2014 to refund over Rs 60,000 crore to the defrauded investors.According to an analysis Sebi had passed orders in about four months so far shows the regulator has taken action against 92 such companies, out of which at least 40 are based in West Bengal alone.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 92 orders passed, 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, reveals an analysis of the 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 Rs 1,175 crore. However, amounts raised by many of these firms are 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.