Stepping up its crackdown against illicit fund-raising activities in a big way, Sebi has busted more than 150 cases of frauds against gullible investors involving close to Rs 13,000 crore in the current fiscal.
These include over 100 cases of deemed public issues, involving an amount of over Rs 2,200 crore and more than 45 cases of illicit Collective Investment Schemes (CIS) worth over Rs 9,500 crore in the fiscal year ending this month.
This marks a significant rise from the previous fiscal, as the total orders passed against deemed public issues in the last two financial years stand at about 110, while the corresponding figure for CIS orders is over 55.
An analysis of the orders passed by Sebi shows that the majority of orders against deemed public issues were in West Bengal, Uttar Pradesh, Madhya Pradesh and Odisha. The same for CIS activities are in Tamil Nadu, Madhya Pradesh, Maharashtra, Uttar Pradesh and West Bengal.
The lack of banking and financial services as well as gaps in laws led to a proliferation of such illegal fund raising in large parts of the country. With the Sebi coming across hundreds of complaints from aggrieved investors, the watchdog stepped up its enforcement and prosecution activities, a senior official said.
With new powers, Sebi has been acting swiftly in the current fiscal against firms and individuals who raised public money by issuance of securities such as debentures and redeemable preference shares without complying with the necessary regulatory laws.
Issue of securities to 50 or more persons entail a legal obligation to get listed on a stock exchange. Among others, it is also mandatory for the companies to bring out a prospectus with respect to the public issue.
Some of the major erring companies include Rose Valley Constructions, Ramel Industries and NVD Solar Ltd. They had raised funds from thousands of investors by luring them with promises of high returns.
Earlier this month, tightening its noose on Kolkata-based I-Core Group for illicit fund-raising activities, Sebi has asked two of its promoter entities to refund nearly Rs 900 crore collected from the investors, while also referring the case to other agencies like RBI, SFIO and ED.
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.
In cases of illegal Collective Investment Schemes (CIS) also, the market watchdog has passed orders against at least 45 companies this fiscal.
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.
Some other major clampdowns by Sebi on companies running unauthorised fund raising activity included Pancard Clubs Ltd and Pune-based Sai Prakash Properties Development.
In the last fiscal, Sebi had passed about ten orders in illegal CIS space.
Sebi action against these firms followed the amendments to the Sebi Act and other related legislations to empower the capital market regulator to crack down on ponzi schemes and other investment frauds.