LS passes Sebi bill to tackle growing ponzi menace

The crucial Sebi bill aimed at tackling the ponzi menace was on Wednesday approved by Lok Sabha with the government saying that Prime Minister Narendra Modi will soon announce a financial scheme which will discourage people from being allured by fraudulent operators.

The Securities Laws (Amendment) Bill, 2014, has been brought in the backdrop of lakhs of small investors being duped by fraudulent investment schemes, like in the alleged Saradha scam.

The new law will empower Sebi investigators to conduct searches and seek information from suspected entities, both within and outside the country. However, as a safeguard, any search operation can be conducted only after approval of a designated court in Mumbai, where Sebi headquarters is based.

Replying to the debate on the Bill, Finance Minister Arun Jaitley said, “Where there is money there are bound to be some sharks. You would have stray cases and it deals with them when strong regulatory mechanism is required.”

He said one of the ways to deal with the menace of ponzi scheme is to expand the reach of banking system to save gullible investors from such schemes. Jaitley further said that the banking system, which “works on conventional and conservative wisdom” is still one of the most reliable form of investments and savings.
Fraudulent investment schemes involving money circulation schemes are popularly known as ponzi.

He said the Securities Laws (Amendment) Bill, 2014, is an attempt to empower Sebi. “Experience tells that those who violate laws may be clever than the law itself and therefore this law to empower its agencies to deal with such people,” he said.

As per the bill, any unregistered scheme having a corpus of Rs 100 crore or more would be deemed as a collective investment scheme.

An ordinance to empower SEBI to deal with ponzi schemes was promulgated thrice during the previous UPA regime but the same could not be passed by Parliament to make it an Act.