Mkt regulator pitches for change in Sebi Act, enabling it to cover chit funds, similar schemes
THE Securities and Exchange Board of India (Sebi) will pass an order banning the West Bengal-based Saradha Group from raising any more money from the market. Meanwhile, the
market regulator has also approached the central government seeking suitable changes to the Sebi Act, enabling it to handle chit funds and similar schemes, currently out of Section 11 AA of the Act that deals with collective investment schemes (CIS).
?There are certain lacunae in the Sebi Act. It has to be strengthened. Sebi has sent a proposal to the government to amend the Act,? a senior Sebi official told FE. He added that the finance ministry had also written to all state governments, including West Bengal, to take strict action against chit funds.
The official said the regulator had decided to act tough with chit fund defaulters and had passed similar orders earlier banning four companies from raising money.
These include Sumangal, Rose Valley and MPS Greenery, two of which had taken recourse to the legal route to escape following the Sebi order and were still raising money from the market.
?One company has taken an injunction from the district court but the high court has passed strictures that the lower court cannot come in the way of the Sebi order. We will approach high courts to ensure that orders banning the defaulting companies from raising money are followed,? said the official.
The collapse of the Saradha Group has led to protests across the West Bengal and the state government is now planning an ordinance to rein in chit funds. Although no official figures are available on how much money the group collected, unofficial estimates put it at about R20,000 crore. West Bengal chief minister Mamata Banerjee on Monday lobbed the ball into the Centre?s court, saying chit fund monitoring was done by the Centre and the state had little knowledge about such companies.