Amended Companies Bill will protect small investors, says Pilot

Our Bureau Updated - December 16, 2012 at 10:16 PM.

Chit funds regulatory loopholes plugged; serious frauds wing to get more teeth

pilot

The amended Companies Bill 2011, which will be placed in Parliament on Monday, has plugged regulatory loopholes on chit funds. Union Minister of State for Corporate Affairs Sachin Pilot said this at a function organised by MCC Chamber of Commerce and Industry here on Sunday.

He said the Centre was for action against financial fraudsters, and States were also welcome to take action in the interest of small investors.

Warning to investors

“The provisions of the Bill made sure that operations of such funds or schemes do not fall between (various) regulatory stools”, he asserted. He said there were numerous complaints of fraud from small investors regarding such money collection schemes and their returns. “Of late, complaints have been received from West Bengal, Maharashtra, Madhya, Pradesh, Sikkim and Assam”.

SEBI had been trying to dissuade investors from putting in money in unregistered collective investment schemes, he said.

“There had been cases of financial frauds in States such as West Bengal where some companies, chit funds and ponzi schemes have taken away the hard-earned money of small investors. Our primary objective is to protect small investors,” he said.

SFIO granted more powers

“Centre is looking into the issue. We would also encourage State Governments in taking necessary action against these firms, which are currently misusing the loopholes in the law,” he added.

He indicated that the Bill has cleared the ambiguities and has given the Serious Fraud Investigation Office (SFIO) teeth for appropriate punitive action.

“In order to prevent corporate frauds before it happens, SFIO will be given more statutory powers. Moreover, there will be better collaboration between investigative agencies at the State and Centre, I-T Department and the Union Information Technology Ministry, with SFIO,” Pilot said.

He pointed out that agencies such as SFIO, the I-T Department and police had so far been on a fire-fighting mode in controlling damages caused by financial frauds in form of ponzi schemes, multi-level marketing scheme or chit funds.

The amended Companies Bill was cleared by the UPA Cabinet on October 4. It is designed to replace the Companies Act of 1956.

jayanta.mallick@thehindu.co.in

Published on December 16, 2012 16:07