NAGPUR: Shreesurya Investment, the firm which allegedly collected massive amount of money from the public by promising to double the return, conveniently avoided getting an approval from any of the agencies regulating financial services.
According to the Securities and Exchange Board of India (SEBI), any plan in which payments made by investors are pooled for the purpose of running the scheme with an object of receiving profits is defined as a collective investment scheme (CIS). To run a CIS, a firm needs permission from the SEBI.
Shreesurya's schemes also largely fit into the definition of CIS laid down by SEBI, but when TOI confirmed it with a source in the market regulator it was found that Shreesurya was not registered with it. So far, only Ahmedabad-based Gift Collective Investment Management Company is registered with SEBI as a CIS, said the source.
Shreesurya's plan too entailed pooling investments solicited from the public to be further used in a whole gamut of businesses run by this group. Against the funds, an investor got a notarized promissory note by its chairman Sameer Joshi stating that s/he would be paying a quarterly interest of 12.5%. One such promissory note is in the possession of TOI.
Shreesurya's crisis coincides with a decision taken by SEBI on Monday in which any unregistered CIS has been declared fraudulent and an unfair trade practice. "If any scheme which fits into the definition of CIS is not registered with the SEBI, it can attract action which includes financial penalty," said the source. This comes against the backdrop of rising instances of fraudulent money pooling schemes such as the Ponzi schemes of West Bengal which had recently hit the headlines after going bust.
The SEBI definition also lists out a few exceptions but those are the financial schemes which are governed by some other regulator such as the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority to even the state's department of cooperatives. However, Joshi himself has admitted that Shreesurya is not registered with any of the regulatory bodies.
"We don't need any permission as ours is a Hindu Undivided Family (HUF) and not a company. So there is no need to get any licence. Of course, the businesses in which the investors' money is parked are run as corporate entities," said Joshi.
"Even if a money collecting scheme remains out of the ambit of any of the regulators it still invites action under the Maharashtra Protection of Interest of Depositors' Act if a complain of breach of promise is registered," said Arun Agrawal, a lawyer specializing in this field.
Financial experts say even if schemes offering unrealistic returns are apparently fraudulent, investors should also not fall to lure of a quick buck.
Ranjit Dani, an independent financial consultant, said since there are several lapses in the law which may provide a leeway to any firm promising unrealistic returns, investors should remain careful. "Normally they get swayed by the flashy lifestyle displayed by the promoters, but investors do not realize that it is their own money which may be going into buying big cars owned by the promoter of a money-pooling schemes," he said.
"It often happens that such schemes are also promoted by qualified financial professionals on whom the general investor reposes his trust. At least, the white-collared class should not canvass for such plans," said Kailash Jogani a former chairman of Institute of Chartered Accountants of India's Nagpur branch.
Shishir Arya, TNN | Aug 14, 2013, 01.31 AM IST