GOVERNMENT ACTION TO CURTAIL FRAUD IN THE CORPORATE SECTOR

The Ministry of Corporate Affairs is in the process of developing an early warning system to identify early signs of frauds including potential frauds. Giving this information in written reply to a question in the Rajya Sabha today, Shri Sachin Pilot, Minister of Corporate Affairs, said that Pilot testing of the proposed system is expected to be completed during 2013-14.

Regarding action against companies indulging in defrauding investors through ponzi schemes, Shri Pilot informed the House that his Ministry has ordered investigation under Section 235 of the Companies Act, 1956 to be conducted by Serious Fraud Investigation Office on the basis of reports of Registrars of Companies in respect of 67 such companies who had allegedly floated ponzi schemes and investigation is being conducted in respect of all of them. As and when the investigation is completed, Government orders prosecution in respect of violations of the provisions of the Companies Act, 1956 and Indian Penal Code, 1860

SEBI TO THE RESCUE TO THE INVESTORS IN THE PONZI SCHEMES AND FRAUD COMPANIES

SEBI to the rescue of those duped by ponzi schemes to get their back money

The Securities and Exchange Board of India (SEBI) said its new powers would help in recovery of money from the fraudulent firms and return them to the investors. The recent amendments have empowered the SEBI to initiate stringent action against unauthorised chit funds and other financial agencies running a business violating rules and regulations.

       "Through the new ordinance, SEBI can search and seize ponzi companies besides recovering their properties and returning it to the investors," SEBI Chairman UK Sinha told a national seminar on 'Investors Education and Protection for Inclusive Growth' in Bhubaneswar.

Stating that the regulator was determined to comedown heavily on ponzi companies, Sinha said "SEBI has taken several initiatives to protect the interests of the common investors". In a major upgrade of powers given to SEBI, the government has allowed it to pass orders like search and seizure, attachment of properties, arrest and detention of defaulters and pass disgorgement directions to recover the wrongful gains made in contravention of laws. As per amended law, Sebi can regulate any money pooling scheme worth Rs 100 crore or more and attach assets in cases of non-compliance.