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Chit fund scam: Sebi begins fresh probe against Saradha Group

Press Trust of India
Apr 23, 2013 at 01:42pm IST

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New Delhi: Amid growing public outrage over an allegedly fraudulent investment scheme run by Saradha group, market regulator has begun a fresh probe into the fund-raising activities of the Kolkata-based entity. The capital market regulator is looking into whether its Collective Investment Scheme (CIS) regulations were violated while raising funds from the public, a senior official said.

Sources said that Sebi began the latest round of investigation after certain complaints were received by it against an alleged large-scale fund raising by the group without getting the necessary approvals, he added.

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The CIS operations are regulated by Sebi and any entity raising funds through this route requires a prior approval from the capital markets regulator. Such schemes typically involves collection of funds from public investors to be pooled for a pre-decided investment objective, but the regulations are very rigorous to thwart any bid to defraud the gullible investors through such products.

Chit fund scam: Sebi begins probe against Saradha Group

Mamata Banerjee had on Monday announced a high-level inquiry and also a SIT probe into the collapse of chit fund company of Saradha Group.

Sebi had earlier also looked into the activities of Saradha Group and had informed the state government about the complaints received by it and its views on the case. While CIS entities are regulated by Sebi, the chit funds do not come under its jurisdiction and it is the state governments which are mainly responsible for acting against erring chit fund operators.

Besides fuelling huge protests in West Bengal by investors and agents, an alleged chit fund scam by Saradha Group has also snow-balled into a political controversy with various parties blaming each other for not taking enough steps to rein in fraudulent deposit-taking activities.

West Bengal Chief Minister Mamata Banerjee had on Monday announced a high-level inquiry and also a SIT probe into the collapse of chit fund company of Saradha Group, which is said to have left thousands of investors in the lurch. Banerjee also sought to blame the Centre for the fiasco.

Meanwhile, a PIL was also filed on Monday in the Calcutta High Court seeking a CBI probe into the alleged scam. The PIL has also demanded the arrest of Trinamool Congress-nominated Rajya Sabha MP Kunal Ghosh, who is Saradha Media's executive chairman, alleging complicity in the matter.

A look-out notice has been issued by the Kolkata Police, which is also investigating the case, for Saradha Group chairman Sudipto Sen.

Stating that strong laws were needed to curb the illegal activities of chit funds, Banerjee said since their operations were governed by central laws and not by the state government, "the onus lies with the central government".

CPI(M), on its part, accused the Trinamool government of supporting chit fund companies, saying the Left parties had been warning the Centre for the past few years that these firms were "looting" poor people in the state.

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