Market regulator SEBI (Securities and Exchange Board of India) attacks organizations involved in collective investment schemes (CIS) in West Bengal. According to SEBI, investments worth thousands of crores had been raised by some companies in West Bengal in violation of SEBI’s Collective Investment Scheme Regulations, the media reports said.
Some organisations against which SEBI has started legal action include MPS Greenery Developers, Rose Valley Real Estate & Constructions and Sun-Plant Agro. The regulator has launched prosecution in 59 cases, of which one case is pending before the Supreme Court regarding the issue of jurisdiction, the reports added.
Collective investment schemes have been flourishing for more than three decades and have been taking advantage of the regulatory loopholes. Since many unregistered organisations were collecting money by issuing financial schemes like agro bonds and plantation bonds in India attracting investors with very high returns, the government decided to call these schemes as CIS under the SEBI Act, the reports said.
In 1999, after the CIS regulations were notified, all organisations operating these schemes were required to register with SEBI. However, till date not a single such scheme is registered with SEBI.
In May 2012, SEBI directed MPS Greenery Developers not to collect any money from investors or to launch any scheme. Sebi had passed an interim order directing the company to deposit Rs 11.69 billion raised by it in an escrow account with a nationalised bank.
However, on a petition filed by an agent of the company before the Calcutta City Civil Court, an ex-parte stay of operation of Sebi's order was granted and implementation of the regulator's order was thwarted.
According to the SEBI Act, orders passed by SEBI can be challenged at the Securities Appellate Tribunal, and later in the Supreme Court. A district court has no role under the Act. Since financial sector regulators have been flooded with complaints from investors, the government is now keen on having a single agency to oversee such schemes, the reports said.