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Sebi gets more powers to tackle ponzi schemes

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SummaryMarket regulator Securities and Exchange Board of India will get the powers to police all money circulation schemes whether listed or not, through an amendment in the Sebi Act

Market regulator Securities and Exchange Board of India will get the powers to police all money circulation schemes whether listed or not, through an amendment in the Sebi Act. This was decided by the Union Cabinet on Wednesday. The government will bring an ordinance soon, said a source.

It will give Sebi the power to regulate chit funds and nidhis if they raise money from the public in any manner for above Rs 100 crore. These will be brought under the definition of collective investment schemes. The current Sebi Act, 1992, specifically excludes these from Sections 11AA while spelling out what is a collective investment scheme.

The Indian Express was the first to report that the government was planning an ordinance on April 27th this year. The proposal will give it powers to crack down on ponzi schemes. In recent months, the Sebi has cracked down on a series of such schemes including Saradha and Rose Valley, among others.

The Cabinet decision also gives Sebi powers to conduct search and seizure operations and access call data records to aid its investigations. The source said the amendments to the Sebi Act and other relevant regulations were finalised in consultations with the regulator. The ordinance will be tabled in Parliament in the forthcoming monsoon session. The proposals were debated by the Financial Stability and Development Council earlier, the highest policy coordination body of the financial regulators, but acquired urgency after Sebi had run-ins with several of them.

The ordinance plan also means the government has accepted that the only way to keep a real-time check on these activities is to have a sole regulator. Sebi would now have the powers to seek information, such as telephone call data records from any persons or entities in respect to any securities transaction being probed by it. It has for long sought the powers to match the changing nature of the securities market in general, and newer tools being used by manipulators to take gullible investors for a ride.

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