Sebi notifies rules to classify illegal CIS schemes as fraud
12 Sept 2013 3:37 AM IST
Tightening the noose around entities running illegal collective investment schemes (CIS), Sebi has notified new norms to classify such activities as frauds and impose penalties of up to three times of their profits.
Besides, the new rules expand the list of activities to be covered under fraudulent and unfair trade practices to hold individuals as well as companies equally guilty for manipulations.
The amendments have been made with effect from 6 September, 2013 to Sebi's Prevention of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, a gazette notification said.
As per the amendments, the list of such practices would now include 'illegal mobilisation of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any collective investment scheme by any person'.
Besides, an 'explanation' has been inserted into these regulations to state that the list of such practices is not exhaustive in nature and the norms would be applicable to all categories of persons and entities.
The 10-year old norms in this regard have been amended to remove certain regulatory gaps, which enabled penal actions against individuals to be challenged on the ground that they meant only for market entities, and not the individuals.
The amendment would allow the list of 'fraudulent and unfair trade practices' to remain open ended, rather than restricting it to 19 broad categories currently.
Besides, the new rules expand the list of activities to be covered under fraudulent and unfair trade practices to hold individuals as well as companies equally guilty for manipulations.
The amendments have been made with effect from 6 September, 2013 to Sebi's Prevention of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, a gazette notification said.
As per the amendments, the list of such practices would now include 'illegal mobilisation of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any collective investment scheme by any person'.
Besides, an 'explanation' has been inserted into these regulations to state that the list of such practices is not exhaustive in nature and the norms would be applicable to all categories of persons and entities.
The 10-year old norms in this regard have been amended to remove certain regulatory gaps, which enabled penal actions against individuals to be challenged on the ground that they meant only for market entities, and not the individuals.
The amendment would allow the list of 'fraudulent and unfair trade practices' to remain open ended, rather than restricting it to 19 broad categories currently.
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