Market watchdog Sebi has asked the government to frame a strong central legislation to tackle the menace of companies collecting large amount of money from the public without requisite regulatory approvals and for dubious investment projects.
Stating the existing legal provisions are weak and allow such companies to benefit from certain loopholes in the regulatory framework, Sebi Chairman U K Sinha said that the market regulator takes action against such entities whenever it suspects anything wrong and gets evidence.
"People make all sorts of excuses - in some cases they claim they are under the state government, some cases they are saying they are registered with the Ministry of Corporate Affairs, some cases they are saying they are housing companies and in some cases they claim to be NBFCs.
"And in most cases, they say that we are not under the Sebi jurisdiction," Sinha said in an interview here.
"But wherever we suspect and we got information and evidence, we take action against them. But the legal provision is relatively weak on this front and I agree that there is need for one strong central legislation because big amount of money is being collected from the citizens of the country," he said.
Giving an example, Sinha said he was recently in Assam and there he was told that all the mutual funds put together have a combined AUM (Asset Under Management) of less than Rs 1,000 crore in the state.
At the same time, there is one such company that launched one scheme and managed to collect more than Rs 1,000 crore, he said, without naming the company.
"So if you make the comparison, you will see the dimension is quite big. So, we have urged the government to make one strong central legislation to tackle this issue," he said.