For multi-level marketing websites operating clandestinely and conducting hidden transactions, the corporate affairs ministry will ask the Financial Intelligence Unit under to track and supply snoop data on them so that SFIO can take action
New Delhi: The government has decided to crack the whip on fraudulent multi-level marketing companies that have duped hundreds of investors in the country by blocking their websites and tracking their online transactions, reports PTI.
Corporate affairs ministry, the nodal department in this regard, has decided that its investigative arm—Serious Fraud Investigation Office (SFIO)—will coordinate with Department of Information Technology and Central Economic Intelligence Bureau (CEIB) to identify suspect websites and transactions and take strict legal action.
Sources said such companies, operating from various locations within the country, have defrauded the public for amounts which could easily run into hundreds of crores.
“There are various entities (multi-level marketing) doing business in India through websites and many such entities do not have a registered office within India. Therefore, in order to prevent funds being transferred outside India, the website of major establishments doing multi-level marketing business need to be stopped through gateways by Department of Information and Technology (DIT). This issue will be taken up with DIT very soon and details of such companies will be provided to it for blocking the payments,” an official privy to the development said.
For multi-level marketing websites operating clandestinely and conducting hidden transactions, the ministry will ask the Financial Intelligence Unit under the finance ministry to track and supply snoop data on them so that SFIO can take action.
The FIU is mandated to generate suspicious transaction reports based on inputs provided by banks and other financial and economic bodies.
The ministry is mulling adding an enabling provision in the Companies Act to initiate legal action of attachment of properties of individual directors of such companies by moving the Company Law Board (CLB) in this regard.
The ministry, during a recent meeting of the SFIO and its regional directors, mooted a plan to activate its marketing intelligence unit to keep a tab on fraudulent innovative systems developed by such companies to cheat the public and investors.
As per SEBI norms any person who holds more than 5% shares for voting rights in a company has to disclose the number of shares held and change in shareholding. The disclosures have to be made even if such change results in stake falling below 5%
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) imposed a total penalty of Rs3 lakh on three entities for failing to make disclosures regarding change in their shareholding in Innovative Tech Pack (ITPL), reports PTI.
In three separate orders, SEBI slapped Rs1 lakh fine each on Sanjeev Reddy Chilumala, Ratna Ketineni and Kanaka Durga Ketineni for failing to make disclosures as required under the norms.
“...hereby impose a monetary penalty of Rs1 lakh...on the noticee (Chilumala),” SEBI said.
Similar worded orders were also passed against Ratna Ketineni and Kanaka Durga Ketineni.
As per SEBI norms any person who holds more than 5% shares for voting rights in a company has to disclose the number of shares held and change in shareholding. The disclosures have to be made even if such change results in stake falling below 5%.
It was alleged that all the three entities had reduced their respective stakes in ITPL between April-July, 2010 but did not make the required disclosures of change in their shareholding.
SEBI found that that Chilumala was holding 6.91% stake in ITPL as on April 2010 which got reduced to 2.21% in June 2010.
Similarly, the shareholding of Ratna Ketineni reduced to 2.92% in July 2010 from 9.68% in April 2010, while that of Kanaka Durga Ketineni declined to 4.18% in June from 6.8% stake held in April.
However, SEBI in its orders said that the available records did not indicate the amount of disproportionate gain or unfair advantage made by the three entities.
In its consent order, dated 1 November 2012, SEBI said its High Powered Advisory Committee has accepted the consent terms involving a payment of settlement charges of Rs37.5 lakh
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has agreed to settle charges against power sector private equity fund “Small is Beautiful” for alleged violation of venture capital investment rules, after payment of Rs37.5 lakh by the fund as settlement charges, reports PTI.
“Small is Beautiful” was established in 2004 as the country’s first private equity fund focussed on investments in power generation assets and is registered with SEBI as a venture capital fund.
SEBI had initiated an enquiry into alleged violation of its investment guidelines for venture capital entities by the Rs231-crore fund, which had garnered contributions from as many 21 public sector banks, financial institutions and insurance companies including Life Insurance Corporation of India (LIC).
However, the fund sought settlement of these proceedings through SEBI’s consent mechanism, wherein a case can be settled after payment of certain charges.
In its consent order, dated 1 November 2012, SEBI said its High Powered Advisory Committee has accepted the consent terms involving a payment of settlement charges of Rs37.5 lakh, which was later agreed upon by the regulator’s panel of whole-time members as well.
Accordingly, the “enquiry proceedings initiated against the appellant (Small is Beautiful) for the alleged violation” of SEBI’s venture capital regulations has been settled upon the payment of these charges, the SEBI order said.
The alleged violation by the private equity fund was brought to SEBI’s notice by the Income Tax Department.
The fund had a total committed corpus of Rs231 crore, out of which Rs226 crore was contributed by state-run banks, insurers and other financial institutions and the balance Rs5 crore by its investment manager KSK Energy Ventures.
Other contributors included IDBI Bank, Power Finance Corp, REC, Andhra Bank, SIDBI, PNB, Bank of Baroda, Oriental Bank of Commerce, Syndicate Bank, UCO Bank and Union Bank of India.
In its income tax returns for assessment year 2007-08, the fund had sought exemptions amounting to Rs11.84 crore. During assessment proceedings, the additional commissioner of Income Tax, Hyderabad observed the fund had violated SEBI's investment guidelines for venture capital funds.
Under these regulations, a venture capital fund is restricted from making investment in its associated companies.
However, it was noted that, during the period of 2005-07, the fund had made investment in its three associated companies, Arasmeta Captive Power Company, Sai Regency Power Corporation and KVK Energy Infrastructure.
The matter was brought to the notice of SEBI by the tax department in March 2011, after which the market regulator initiated enquiry proceedings by the issuance of show cause notice on 9 August 2011 into the affairs and dealings of the fund for alleged violation of these regulations.