WB agro, chit funds to face SEBI whip
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The Securities and Exchange Board of India (SEBI) has decided to crack down on several West Bengal-based agro and chit funds with linkages to media businesses.
With concerns being expressed about these companies raising money from the public and then using their media businesses as dedicated platforms to advertise their products, the board has asked its regional office in Kolkata to send details so that suitable action can be taken.
The Financial Stability and Development Council, the apex coordinating mechanism among financial sector regulators, is backing SEBI on this. The council is headed by the finance minister.
A top source in SEBI confirmed that there were concerns about these Bengal-based non-banking financial companies. The money they raise from the public slips between equities and listed debt issues and so escapes the domain of any financial sector regulator.
The organisations are usually registered with the Registrar of Companies with the suffix "group". The specific entity which raises the subscriptions is usually not registered, but claims affiliation with the registered company to gain the confidence of the public.
Many of these companies have also begun to front for political organisations, with some of their promoters already legislators or known to have political connections.
The board has been cracking down across the country against such companies that access public deposits either through plain vanilla schemes or agro investment plans. Often these are sheer Ponzi schemes. West Bengal has the highest number of such schemes in eastern India, with one estimate putting the number of them registered in Kolkata alone at 27.
The endorsement by the Supreme Court of SEBI's position in the Sahara case has also made it possible for the regulator to investigate many of these companies. In the Sahara case, the board was able to prove that funds raised from the public by two of the Sahara companies were beyond the approval these had secured.