States cool as Sebi seeks to crack down on Ponzi schemes

Armed with more power to deal with frauds and fly-by-night operators, capital market regulator Securities and Exchange Board of India (Sebi) is preparing to crack the whip on hundreds of Ponzi schemes across the country, but the only thing lacking is cooperation from state  governments.

Sebi had written to state governments to set up high-level committees to oversee fraudulent schemes and also help central agencies to ensure timely action against unauthorised fund mobilisation activities.

 

The Union Finance Ministry too had sent missives to state governments to set up a coordination committee including representatives of SEBI, RBI, Ministry of Company Affairs (MCA) and the economic offences wings of the state police. So far, only Kerala and Odisha have complied.

 

A senior government official said Sebi has enhanced surveillance to thwart attempts against such schemes and is finalising search-and-seizure operations in certain cases to bolster its investigations.

 

The latest Sebi ordinance, which came into effect 10 days ago, allows the regulator to enhance its penalties against defaulters within three months and seek services of police and central government officers for search-and-seizure operations.

 

Sebi has already initiated steps to  thwart attempts by listed companies and others to channelise illicit funds through capital markets or investment schemes for the Lok Sabha elections.

 

There are indications that many entities running illicit money-pooling schemes have lined up huge redemptions from fictitious investor accounts, and this money could also find its way into electioneering activities.

Instances of dabba trading, as also other suspicious activities, have come to light in Mumbai, Indore, Rajkot and Delhi, besides cities in states like West Bengal, Punjab and Haryana, as also various online platforms, sources said.

 

Foreign funds coming through capital markets are also being monitored closely to check possible laundering for political purposes. Dealings of various market entities are also being placed under scrutiny. 

These include heads of governments, senior politicians, senior government, judicial, military officers, senior executives of state-owned corporations and key political party officials.

The finance ministry had set up an inter-ministerial committee that said that more than 500 such schemes were being run across the country.

 

The committee had said that West Bengal, Orissa, Maharashtra and Kerala have the maximum number of such schemes in operation.