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Updated: March 27, 2013 00:51 IST

SEBI wants single regulator for deposit-taking cos

Special Correspondent
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SEBI chairman U. K. Sinha
SEBI chairman U. K. Sinha

The Securities and Exchange Board of India (SEBI), on Tuesday, urged the government to form a single regulator for companies taking deposits from the public in an illegal manner.

Stating this, SEBI chairman U. K. Sinha said that the regulator had launched investigations against such deposit-taking companies.

“We have asked the government for a new set of laws so as to have a single regulator for these sort of companies,” he said in response to a question on chit funds at an interactive session organised by the Confederation of Indian Industry (CII) –eastern region here.

Existing loopholes

He also pointed out that these deposit-taking firms were taking advantage of loopholes in existing laws. “We have also taken up with the government so that the loopholes are plugged” he said.

“In these sort of deposits, assurances are being given on doubling the money in four years and hefty commissions of 15 to 20 per cent are being paid to agents. I cannot think of any legitimate business doing this,” Mr. Sinha said.

“After some time they would not get any returns. They may also lose all their money It is a very worrying situation,” Mr Sinha said.

The capital market regulator is also planning to put in place new sets of regulation against insider trading and on share buyback.

Admitting that present regulations were very old, Mr. Sinha said that SEBI would come out with revised regulations on insider trading by this year. On share buyback, he said that it should be used to reward investors rather than to manipulate share prices.

“We got the impression that some companies were resorting to buyback of shares to manipulate the share prices and not for rewarding the investors,” he said, adding that comments have been received on a discussion paper prepared in this regard.

“We will bring out new buyback regulations to tighten the system”, Mr. Sinha said.

Bond trading

SEBI is also planning to introduce regulations for trading of bonds on the market, Mr. Sinha said, while exhorting corporate to raise money through debt. “The country’s corporate bond market was not very well-developed,” he noted.

Flagging some worrisome signs in the marketplace, Mr. Sinha pointed to the declining trend of corporates raising capital through the primary market. The figure has dropped from Rs. 67,000 crore in 2010-11 to Rs. 14,500 crore between April and February 2012-13.

Pointing out that the decline is substantial compared to the BRICS countries , he said that a worrisome signal was that corporates either allowed their applications to lapse, or withdrew their request for raising money.

Keywords: SEBIU. K. SinhaCII

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More In: Industry | Business

Concerns expressed by SEBI Chief are genuine. It is time both the
Central and State governments take early steps to plug the loopholes
so that investors are not cheated. It is an open secret that many co-
operative credit societies, Chit Funds and Nidhi companies, who
solicit deposits by offering high returns, are often used as vehicles
for parking laundered money and also to cheat gullible small
investors. This is possible as regulation of these organizations is
poor and the State level bureaucracy including the police is neither
trained nor equipped to regulate activities of such organizations. It
is necessary, therefore, to listen carefully to what SEBI chief says
and promptly take remedial measures.

from:  Narendra M Apte
Posted on: Mar 27, 2013 at 15:39 IST

Concerns expressed by SEBI Chief are genuine. It is time both the
Central and State governments take early steps to plug the loopholes
so that investors are not cheated. It is an open secret that many co-
operative credit societies, Chit Funds and Nidhi companies are often
used as vehicles for parking laundered money and also to cheat
gullible small investors. This is possible as regulation of these
organizations is poor and the State level bureaucracy including the
police is neither trained nor equipped to regulate activities of such
organizations. It is necessary, therefore, to listen carefully to what
SEBI chief says and promptly take remedial measures.

from:  Narendra M Apte
Posted on: Mar 27, 2013 at 08:42 IST
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