The Special Court termed the purchase of the flat by Citi Limousine chief Masood as 'proceeds of crime', who was involved in money laundering by defrauding the hard earned money of gullible investors
A Special money laundering Court in New Delhi has ordered attachment of a flat worth over Rs22 lakh belonging to Sayed Mohammed Masood, chairman of Mumbai-based ‘City Limousine' that has duped thousands of investors through its money-circulation scheme.
The case had shot to prominence last year after the Enforcement Directorate (ED) got a first-time access to freeze Swiss bank accounts of Masood, whom the agency is probing for floating illegal ponzi (fraud investment plans) schemes by promising extraordinary returns which were not honoured.
The agency is probing the case under the Prevention of Money laundering Act (PMLA) alongside the Economic Offences Wing (EOW) of Mumbai Police.
Subsequent to pressing these laundering charges, the ED provisionally attached a flat in Pune’s Wakad area in the name of Ryewood Retreat Motels, which has Masood as its Additional Director.
The Adjudicating Authority, under Chairman K Ramamoorthy, for PMLA offences termed the purchase of the flat “as proceeds of crime” and that it is involved in money laundering by defrauding the hard earned money of gullible investors.
The probe agencies had filed a charge sheet in this case last year stating that close to 28,000 complaints from the investors were received by them in this regard and Masood’s companies had cheated investors to the tune of more than Rs500 crore.
Nifty has to stay above 6,280 and make higher highs, to keep the short-term rally going.
The markets opened up and moved mostly tentatively sideways throughout Monday, before a late sell-off sent it careening downwards. However, it finished in the green. Even though Nifty closed above 6,280, it would need to do so in the coming days to show some strength and keep the short-term rally going. This is more pertinent even after International Monetary Fund (IMF) sounded upbeat over the strength of US economy. However, IT sector was seen trending down despite this news. It shows that markets are nervous still. But a major directional move may only come in January next year, as elections get closer.
The 30-share BSE Sensex opened at 21,080 while the 50-share NSE Nifty opened at 6,267. The Sensex moved from the level of 21,207 to the level of 21,059 and closed at 21,101 (up 21 points or 0.10%) while the Nifty hit a high of 6,317 and closed at 6,284.50 (up 10.25 points or 0.16%) after hitting a low of 6,266.
CNX IT and CNX Media were hit the most, falling down 1.08% and 0.52% respectively. Most indices finished in the green. CNX Realty and CNX Metals finished strong, moving up 3.35% and 1.57% respectively.
Of the 50 stocks on the Nifty, 32 ended in the green. The top five gainers were Jindal Steel (5.41%); PNB (4.46%); DLF (4.17%); Hindalco (3.47%) and Grasim (2.71%). The bottom four losers were Infosys (-2.38%); Tata Power (-1.87%); HDFC (-1.48%); Lupin (-1.03%) and Asian Paints (-0.94%).
The Reserve Bank of India (RBI) governor, Raghuram Rajan, stated that despite a fall in the current account deficit India is not out of the woods yet, so to speak, and hopes to make rupee a worthy currency to invest in. He has also stated that as much as $26 billion dollars were brought in through the swap facility opened by RBI. He also said that the government response to food inflation needs to be improved by debottlenecking the supply-side. On a related note, the government has stated that it may permit oil marketing companies to hike transport fees for LPG cylinders.
Today, the global markets were upbeat overall on IMF renewed optimism over the US economy. Both European and Asian markets were trending up, when Christian Lagarde, IMF chief, said in a TV show on Sunday that she sees more growth and certainty in the world’s largest economy in 2014. She gave a rosier view after the US Federal Reserve decided to taper its bond buying program.
With the exception of Spain, most European markets were trending up. FTSE and DAX were nearly half a percent up. Similarly, Asian markets were up led by Hang Seng and Shanghai, moving up 0.48% and 0.25% respectively. Nikkei finished flat with an upwards bias.
At the same time, gold seems to be taking the fall amidst its worst year in years, signaling that years of upwards movement maybe finally coming to an end (in dollar terms). After the US announced tapering, it fell 2.5%. Currently, gold futures are quoting $1,201 an ounce, and are trading downwards in the futures market. Gold has lost 29% so far this year, in dollar terms.
Why is it that the interests of consumers and consultations with consumers is never at the centre of any rules the regulators make?
If you ask a roomful of people whether the consumer should be the primary focus of financial sector regulation, it would be safe to bet that you will have nearly 100% concurrence. Every stakeholder pays verbal obeisance to the importance of the consumer of financial services. The preamble of all statutes creating independent regulators (for capital markets, insurance or provident funds) casts a duty on regulators to ‘develop’ markets and ‘protect investors’. But, as Moneylife has repeatedly pointed out, regulators and policy-makers merely dance around issues that consumers face, without ever interacting with them to frame appropriate regulation.
This is why after 25 years of modernisation, development and regulation by India’s capital market watchdog, we have only seen an exodus of retail investors from primary and secondary market as well as mutual funds. It is also the reason why we are an under-insured nation and why our pension regulator has made no headway. But, put a set of neutral people connected with the financial sector in a room and the focus immediately becomes the consumer. At an interesting panel discussion organised by CUTS International on 16th December, there was a strong consensus that ‘there is need to focus on the consumer as the core purpose of all financial sector regulation’.
What do I mean by regulators’ dance around consumer issues without addressing them? Consider how the Securities & Exchange Board of India (SEBI) deals with mis-selling of products to retail investors. First, it makes it impossible for genuine and honest advisors or brokerage firms to function by tying them up in costs, rules, red tape and permissions. Those who ignore the regulator happily fly below the radar, unless they do something so big and foolish that they are caught. And, even the honest and ethical, who occasionally stumble on meaningless rules, are hauled over the coals.
Instead, exemplary punitive action in select cases or adopting a class action approach to mis-selling techniques will get better results. Consider the Suchitra Krishnamoorthi case that we have repeatedly documented. SEBI took long enough to issue a show-cause notice to HSBC and is now hearing the matter. A stiff monetary penalty and disgorgement order will really send a strong message to banks who have perfected the art of mis-selling of third-party products to their customers. Banks violate their fiduciary responsibility to customers when they mis-sell mutual funds, insurance or wealth management services; they get away with it because the Reserve Bank of India (RBI) has a hands-off approach to products that have separate regulators.
Tough action by RBI or SEBI in Ms Krishnamoorthi’s case would fall squarely within the new global thinking on consumer protection, which has moved away from the meaningless disclosure-based regime that we continue to follow to a policy of ‘treating customers fairly’ and ensuring that financial products are simple, easy to understand and sold on the basis of the customers’ needs and financial profile. Let’s look at a couple of key issues that came up at this consumer-centric discussion.
The multiplicity of regulators, and having similar products regulated by different regulators, leading to regulatory arbitrage and conflict between regulators was flagged off as an important concern. Turf wars between SEBI and the insurance regulator and the fact that we have a separate pension regulator when asset management companies will manage the pension funds were cited as examples.
A prominent view was that the lack of coordination between regulators was the key reason for conflicts and inappropriate regulation. And coordination was missing because regulatory bodies had become sinecures for retired bureaucrats who, often, bagged these posts without any relevant experience in the sector. These appointees were then expected to decide on complex, technical and developing issues—a tough act even for those with decades of experience in a given sector. This would not have mattered if regulators were accountable to parliament. Unfortunately, even the standing committees of parliament do not exert any clout because very few members have domain knowledge of, or interest in, regulation, good governance or consumer protection.
In the past year, the appointment of SEBI chairman has been the subject of multiple litigations. There is now a move to extend the term of the current incumbent through an executive decision. Such ugly controversies can be avoided if key appointments are validated by parliament or a select parliamentary committee as is done in the US.
Many panel members felt that the FSLRC’s (Financial Sector Legislative Reforms Committee) recommendation has provided answers to many of these issues by proposing a unified regulator. Unfortunately, dissenting notes by three of the FSLRC’s key members marred the report. One would have thought that a committee as eminent as the FSLRC, which operated on a generous public budget, would have understood the need to hammer out a consensus and present a set of unanimous and unequivocal recommendations. We also find it strange that FSLRC made almost no effort to engage with consumers or consumer organisations in the financial sector.
Prithvi Haldea, chairman of Prime Database group, raised a very significant issue. He pointed out that the absence of a systematic data collection, analysis and interpretation mechanism, that could feed into policy- and regulation-making, is resulting in poor regulation and a lack of regulatory predictability. Mr Haldea’s www.watchoutinvestors.com has been providing yeoman’s service to consumers by publishing orders of a slew of regulatory agencies, quasi-regulatory and self-regulatory organisations in the financial sector and those under the ministry of corporate affairs. Watchoutinvestors.com is doing the job that the government and our regulators ought to be doing, in creating this goldmine of collated, cleaned and standardised information which can be the basis of significant academic research and policy-making. Instead, regulators hardly give the work its due and Mr Haldea says he, often, receive threats and requests to remove regulatory orders posted on the website.
Citing an example of how data capture can improve regulation, Mr Haldea pointed out that promoters, often, reclassify themselves as public investors in order to sidestep regulations and disclosure rules. They also change the classification repeatedly, without any fear of detection, since regulators have no mechanism to track the mischief. In one case detected by Mr Haldea, a promoter had changed his classification from promoter to public investor as many as five times. In the absence professional data-mining, there is no scope for detecting or acting on early warning signals thrown up by these corporate actions.
We, at Moneylife, believe that data-mining and analysis that Mr Haldea refers to, especially with regard to information filed with the registrar of companies, is critical to detect and act against thousands of ponzi schemes or direct marketing scams that are looting gullible Indians everyday.
What was evident from this discussion was that almost every regulatory change that would be considered imperative to true consumer protection would be opposed by corporate lobbies as well as government bureaucrats who enjoy a five-year extension to the power and perks they draw at the highest level. A quick data check would also reveal that all top regulators spend over half of their time on foreign tours. This leaves little time for serious consumer protection. The result is that we have endless articulation and forced spending on ‘financial literacy’, but very little action on the ground.
Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]