Today as many of you may be aware that Collective Investment Schemes (CIS) are in spotlight for all wrong reasons. Getting lured by tall claims in the past, many investors have indulged in CIS without a prima facie assessment whether they are registered with the Securities and Exchange Board of India (SEBI) [in accordance to SEBI CIS (Regulations) 1999)] or even evaluating whether it fits their risk appetite. This has thus left investors with a feeling of being betrayed and maybe even an economic loss.

But now realising the loopholes in securities laws, which has resulted in scandals; the Government is considering a major overhaul of regulations governing such aforesaid money pooling schemes. This may provide great power with the capital market regulator – SEBI, to check such money pooling frauds. It is expected that SEBI may get the following powers, amongst others.

• Power to seek any information from any entity in relation to its probes against erring persons and entities;
• Power to attach properties; and
• Search & seizure
  
  

Also it is likely that the definition of CIS could be expanded to include all kinds of activities involving collection of Rs 100 crore or more public money.

Likewise it is possible that amendments could also be made to host of other Acts such as, SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996

PersonalFN is of the view that these much required amendments to securities laws and greater powers to the capital market regulator seem to have been considered by the Government and brought on a fast-track after the on-going legal tussle between SEBI and Sahara group (involving two companies’ viz. Sahara India Real Estate Corporation and Sahara Housing Investment Corporation), and now the very recent one with Saradha Realty India Ltd. The loopholes in the laws have been put to advantage and therefore if the laws are amended more stringently, one could see cases of frauds lowering as strict vigilance would be in place. It is noteworthy that a strong legislation would put a restrain on unethical and unscrupulous practices and this in turn may serve larger interest of investors.

PersonalFN believes it imperative for you to be a responsible investor and make investment decisions based on your risk profile, investment objective and also which help achieve for financial goals. There is no point getting swayed by exuberance created by the market or getting lured by the sales pitch of agents / distributors / relationship managers. Remember, it is your hard earned money and therefore adopt enough prudence while investing.

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