Cabinet for giving more power to SEBI to regulate chit funds In a bid to give more power to the Securities and Exchange Board of India for cracking down on ponzi schemes, the Cabinet yesterday gave its approval for bringing an ordinance to amend the Securities and Exchange Board of India Act, a senior minister said. The ordinance is expected to be sent to President Pranab Mukherjee for his nod later yesterday, a government source separately said. The move is aimed at authorising SEBI with direct powers to carry out search and seizure operations with authority to attach assets of firms carrying out ponzi schemes. The Cabinet decision assumes significance as it comes in the wake of the chit fund scam in West Bengal, where Saradha group, which had collected billions of rupees from people living in villages and small towns by promising huge returns, shut shop following a string of allegations that it had been defaulting on payments. Earlier, the government-appointed inter-ministerial panel for "proper enforcement" of the regulatory framework for multi-level marketing companies, non-banking finance companies, and companies running chit funds had in mid-May recommended strengthening of the existing coordination mechanisms for regulation and supervision of the financial sector. Subsequently, the Parliamentary panel on finance had suggested setting up of a co-ordinating body by the Reserve Bank of India to monitor chit fund-type financial institutions on a regular basis. Senior Bhartiya Janata Party leader Yashwant Sinha, the head of the Parliamentary panel, had also suggested to the government to promulgate an ordinance to temporarily ban chit funds companies from collecting deposits.
Posted on: Thu, 18 Jul 2013 04:00:45 +0000