Market regulator gets tough with entities charged with offences like illegal money pooling, insider trading and fraudulent trades

Mumbai : To ring-fence investors and markets from fraudulent activities, Sebi tightened norms for money-pooling schemes and decided to keep serious offences out of its settlement mechanism.

The new regulations — pertaining to three areas — also facilitate refund to small investors who suffer losses due to irregularities in the market.
With regard to collective investment schemes, it would be compulsory for all transactions to be conducted through cheque, draft or other banking channels, and not in cash.
For starting a CIS, a person needs to make an application for registration as Collective Investment Management Company.
This set of new norms is called the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2014. These rules are related to an ordinance – promulgated for the second time in September – that provides for regulation of pooling of funds under any scheme or arrangement, involving a corpus of Rs 100 crore or more, and are deemed to be a CIS.
Further, stricter set of settlement norms have been notified. Under them, entities charged with committing serious offences like illegal money pooling, insider trading and fraudulent trades would not be able to settle them any more.
The new regulations have been notified with retrospective effect from April 20, 2007 — the day when Sebi’s existing consent settlement system was introduced.
These norms under Sebi (Settlement of Administrative and Civil Proceedings) Regulations, 2014 also provide for guiding factors for dealing with the settlement process, while serious offences such as insider trading are excluded from the scope of settlement.
Meanwhile, to help aggrieved investors, the regulator notified new rules that allows it to utilise Investor Protection and Education Fund to refund their money. This would be done in certain cases it “deems fit” make “restitution to eligible and identifiable investors who have suffered losses resulting from violation of securities laws…”
So far, the IPEF funds were utilised for the purposes of protection and education of investors including activities like seminars, training, for aiding investor associations and refund of the security deposits, among others.

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