Operators of illegal money-pooling or MLM schemes will soon face penalties of up to three times the profit made by them as against the current provision of a fine of Rs1 crore
Market regulator Securities and Exchange Board of India (SEBI) has decided to increase the monetary penalty for those running unauthorised collective investment schemes (CIS), as the existing mechanism has not proved to be sufficient to deter such illegal mobilisation of money.
Operators of illegal money-pooling or multi-level marketing (MLM) schemes will soon face penalties of up to three times the profit made by them, as against the current provision of a meagre fine of Rs1 crore
A proposal to this effect has been approved by SEBI and the same would be notified soon, a senior official told PTI.
As per a SEBI memorandum in this regard, illegal mobilisation of funds within the existing legal framework falls within a provision wherein a maximum penalty of Rs1 crore may be imposed.
SEBI is of the view that this penalty “is very meagre compared to the money mobilised by unregistered CIS, especially considering that in certain cases the money mobilised is in multiples of thousand crore.
“Hence, adjudication under the existing mechanism may not be sufficient to deter such illegal mobilisation of money.”
Accordingly, SEBI has decided to amend the relevant regulations to provide for “a penalty of Rs25 crore or three times the amount of profits made, whichever is higher”.
To tackle the growing menace of investors being duped of their hard-earned money through various illegal investment pools, many of which are in the nature of ‘ponzi’ schemes, SEBI has been given the mandate to take action against all such money collection activities involving Rs100 crore and more.
A typical ‘ponzi’ scheme involves the operator collecting a large amount of money from investors and paying them returns from their own money or the money collected from subsequent investors, rather than from profit earned by the person or entity operating such a scheme.
Such activities came to be known as ‘ponzi’ schemes after Charles Ponzi, who became notorious in the US in 1920s for deploying this technique while promising 50% return on investments in 45 days and 100% within 90 days.
A large number of such schemes have come to the fore in India as well, while many of them have faced regulatory actions by SEBI in recent months.
However, SEBI in most of the cases has only asked the operators of such schemes to refund the money to investors and stop such unauthorised activities. The schemes that have faced action include those promising huge returns based on investments on potatoes, goat rearing, cattle and butter schemes, Emu farming, real estate and holiday memberships.
Tightening the noose on perpetrators of such investment pools, SEBI in its board meeting earlier this month decided that all unauthorised CIS activities be declared as ‘fraudulent and unfair trade practices’ and dealt with accordingly
Reliance on the existing, very leaky, public distribution system or ration shops for the Food Security Bill will have adverse repercussions. The Bill promises to provide foodgrains at Re1 to Rs3 per kg, while paying farmers Rs12.85 per kg for wheat and Rs12.50 per kg for paddy as MSP. Who will pay the difference between MSP and selling price?
Where there is hunger, law is not regarded; and where law is not regarded, there will be hunger. – Benjamin Franklin
The United Progressive Alliance (UPA) government finally was able to get approval for its ambitious Food Security Bill (FSB) from the Lok Sabha. It will now be considered by the Rajya Sabha (upper house). The FSB, the brainchild of UPA chairperson Sonia Gandhi, aims to give legal rights to 67% of the population (those below the poverty line-BPL) over a uniform quantity of 5 kg foodgrain a month at Re1 to Rs3 per kg. Although, the UPA government aims to provide food security to poor, its implementation is left with the state government, who may or may not be a willing partner in the scheme. Already, there are concerns being raised on this front as well as FSB's possible impact on the country's exchequer.
According to Nomura Financial Advisory and Securities (India) Pvt Ltd, the country's economy can ill-afford the FSB at current juncture. "While the Bill aims to promote inclusive growth and the government hopes to garner political mileage from it (general elections are due by May 2014), we believe that a reliance on the existing, very leaky, public distribution system will have adverse macro repercussions and cause increased imbalances in the agriculture sector," Nomura said in a research note.
Industry body Confederation of Indian Industry (CII) too has raised concerns. In a release, Kris Gopalakrishnan, president, CII, said, "Such a large outlay at this point in time would definitely have a negative impact on the fiscal deficit. This needs to be managed. The larger concern is regarding the effective implementation of such a high profile and critical social agenda of the Government. The use of public distribution system (PDS or ration shops) raises questions about the efficacy of the model. Targeting is another area that would need special attention. CII hopes that appropriate focus would be given to these aspects—mainly that of targeting so that the needy can benefit from this programme."
In a statement, the government said, "Access to highly subsidised food grains to small farmers under proposed Food Security Act and assured minimum support price (MSP) for their produce will ease the burden on their earnings and allow them the option to spend the money so saved on other necessities. Hence, it is expected to help improve their quality of life. Therefore, contrary to dissuading farmers from producing more, the Act will in fact encourage them to produce more."
The FSB aims to provide subsidized rice, wheat and coarse cereals to 67% of the population. However, the consumption pattern across the country varies. In fact, some states like Rajasthan do not sell wheat in its PDS shops. In Jharkhand, the quantity of rice consumed by a rural BPL household is 3.6 times its consumption of wheat. By contrast, in Rajasthan the foodgrain consumption under PDS almost entirely comprises of rice.
As per the Tendulkar Committee estimates around 41% of rural and 25% of urban population fall under the below poverty line or BPL category.
According to the government, the FSB would require 62 million tonnes of food grain every year, and the food subsidy bill would rise to Rs1.3 lakh crore per annum (1.2% of GDP) from Rs80,000 crore currently (0.8% of GDP), or an additional fiscal burden of 0.3-0.4 percentage points every year. The full fiscal impact of the bill will not be felt this year, as half of the current fiscal year is already over and states will take some time to identify the list of beneficiaries.
"However, once the bill is fully implemented (likely from FY15), the total cost is likely to rise substantially for two reasons. First, the food subsidy bill will rise, and second, there will be ancillary expenditures associated with creating the infrastructure to implement this bill. Additionally, we see the bill as inflationary, because it creates a demand-supply mismatch, requires raising minimum support prices to encourage production, could create a shortage of non-grain food items and reduces the marketable surplus for the private sector," Nomura said.
The FSB lays emphasis only on cereals, neglecting other food items and overlooking the issue of nutrition, which should be the end target. In rice and wheat prices, the inflation is just around 1%. What about other items; especially vegetables, fruits and pulses, where there is substantial scarcity?
After failing to pass the FSB through Parliament, the Union Cabinet promulgated this Ordinance a few weeks before the monsoon session was to commence. At that time, Arvind P Datar, a senior advocate of the Madras High Court and the Supreme Court had raised questions over the emergency for bringing out the Ordinance.
“The gargantuan amounts that will be spent on Food Security and other schemes will necessarily reduce the amounts available for improving our infrastructure, education and, equally important, our defence sector. The Food Security Bill may well be the tipping point in our nation’s future and make economic recovery extremely difficult if not impossible. Philanthropy without productivity, welfare without wealth and charity without capital will guarantee the bankruptcy of any nation,” he had said.
Haryana chief minister, BS Hooda has claimed Robert Vadra, the son-in-law of Congress president Sonia Gandhi is a small farmer from the state. Here are some reactions in twitter to Mr Hooda’s comment
Following the uproar over IAS officer Ashok Khemka’s 100-page submission to Haryana government on the Robert Vadra-DLF deal, the state chief minister has given a clean chit to the son-in-law of Congress president Sonia Gandhi. In an interview to The Hindu, Bhupinder Singh Hooda, chief minister of Haryana has said, "He (Vadra) is a landowner. If he owns land designated as an agricultural zone, then he is a farmer. This uproar (over 3.53 acres) is only because he is the son-in-law of the Congress president. Thirty-five to 40 per cent of our licences are given to such small farmers who enter into collaboration agreements with developers. It is not illegal."
However, the social media is abuzz with this clean chit given by the Haryana chief minister to Mr Vadra over the land transactions.
Here are some interesting tweets...
@SujnanNayak #IfRobertVadraIsASmallFarmer then Mukesh Ambani is small time grocery shop owner & Anil a mobile repairer.
@rsyashasvi #IfRobertVadraIsASmallFarmer hope he stands in the ration shop queue to get 25 KG free grains now that #FoodSecurityBill bill is passed!
@sonalchainani #IfRobertVadraIsASmallFarmer then Gurgaon should be renamed as JAMAICA... because half of the Gurgaon land is actually JAMAI KA!
@sharmarohitraj #IfRobertVadraIsASmallFarmer Then he probably grows 20 feet potato in his fields.
@Prakash_Sharma #IfRobertVadraIsASmallFarmer then Dawood Ibrahim is a small time pick pocket!
@gajender00 #IfRobertVadraIsASmallFarmer we can proudly say to the world,Look here guys we give Z security to even a small farmer & #FoodForAll
@bharatmodi_ #IfRobertVadraIsASmallFarmer then al-Qaeda is an elite peace keeping force
@Alllahdin #IfRobertVadraIsASmallFarmer KRK is NASA's chief, MMS is a Rock Artist,Udai Chopra is 5-times Oscar Winner,n Twitter is fr losers..Ohh Wait.
@KartikDayanand #IfRobertVadraIsASmallFarmer and so is Amitabh Bachchan, remember? And yes, Sachin Tendulkar is an actor and I am your next Prime Minister!
@PrateekShah #IfRobertVadraIsASmallFarmer Arnab Goswami is a great listener, Mayawati is Miss India, Nitin Gadkari runs faster than Milkha Singh
@indiantweeter IfRobertVadraIsASmallFarmer Barack Obama is president of Somalia
@fakingnews #IfRobertVadraIsASmallFarmer Amitabh Bachchan is a struggling actor.