Lok Sabha Question No. 694 (UNSTARRED), answered on 2018-12-14
Subject: Multi-Crore Scams
Ministry: FINANCE
Asked by: DODDAALAHALLI KEMPEGOWDA SURESH

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA4

## UNSTARRED QUESTION NO. 694 TO BE ANSWERED ON FRIDAY, DECEMBER 14, 2018/AGRAHAYANA 23, 1940 (SAKA) MULTI-CRORE SCAMS

## 694. SHRI D.K. SURESH:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  incidents  of  the  multi-crore  investment  scams,  involved  in  luring customers to invest by promising them higher returns are on the rise in the country, if so, the details thereof;
- (b) the number of such investment scams reported in the country during the last three years, year/scam-wise;
- (c) whether the Government has taken any measures to curb the growing scams and rescue the common people from losing their hard earned money, if so, the details thereof; and
- (d) whether the Government has taken any steps against the culprits involved in such scams and if so, the details thereof?

## ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SHIV PRATAP SHUKLA)

- (a) and (b): As per the information received from regulators and enforcement agencies, the details are:
-  The  Reserve  Bank  of  India  (RBI)  has  informed  that  978  cases  of  unauthorized collection of funds were discussed in State Level Coordination Committee (SLCC) meetings in  various  States/  Union  Territories,  so  that  action  may  be  taken  by  the respective regulators/ law enforcement agencies in the States for dealing with the complaints.
-  The  Securities  and  Exchange  Board  of  India   (SEBI)  has  received  complaints alleging  raising  of  funds  by  companies  from  the  public  from  through  issuance  of shares  / convertible securities without complying  with  the  statutory/regulatory requirements  specified  by  SEBI.  SEBI  has  passed  30  orders  related  to  Deemed Public Issue of Equity (DPI) during the last 3 years (5 in 2015-16, 3 in 2016-17, 16 in 2017-18 and 6 in 2018-19 till Nov, 2018). SEBI has also passed Orders against 73 entities  for  non-compliance  of  SEBI  (Collective  Investment  Schemes)  Regulations, 1999 during the last 3 years (34 in 2015-16, 11 in 2016-17, 19 in 2017-18 and 9 in 2018-19 till Nov, 2018).
-  During  the  last  three  years,  the  number  of  investment  scams  reported  to  the Enforcement Directorate (ED) is 49 (38 in 2016, 05 in 2017 and 06 in 2018).
-  The Ministry of Corporate Affairs (MCA) has ordered investigation into the affairs of 109 companies allegedly involved in investment scams (such as Chit Fund scams/ MLM/ Ponzi Schemes) and has assigned them to the Serious Frauds Investigation Office (SFIO) during the last three years (47 in 2015-16, 27 in 2016-17, 34 in 201718 and 1 in 2018-19).
-  The Central Bureau of Investigation (CBI) has registered 166 cases relating to Chit Fund / Ponzi companies during the last 4 years (14 in 2015, 23 in 2016, 109 in 2017 and 20 in 2018 upto 30.11.2018).

(c)  and  (d): The  following  measures  have  been  taken  by  the  Government  to  curb unauthorized  schemes  and  to  prevent  common  people  from  losing  their  hard  earned money:

-  The Banning of Unregulated Deposit Schemes Bill, 2018 has been introduced in the Lok  Sabha  on  18.07.2018.  The  proposed  Bill  will  ban  all  such  deposit  schemes which are unregulated.
-  28 States / Union Territories have passed Protection of Interest of Depositors (PID) Acts  for  taking  action  against  entities  collecting  money  from  the  public  by   making false promises regarding unreasonable rates of interest on deposit.
-  RBI has cautioned the public regarding Ponzi schemes under the head of Frequently Asked  Questions  (FAQs)  on  their  website.  Further,  through  RBI's  online  portal SACHET (https://sachet.rbi.org.in), public are cautioned against fraudulent schemes/entities. Advertisements are also published by RBI through Newspaper/Radio/  Television  on  the  need  to  verify  credentials  of  offers/entities before making any investment by public.
-  ED has issued Provisional Attachment Orders and filed Prosecution Complaints in cases  involving  contravention  of  the  Foreign  Exchange  Management  Act,  1999 (FEMA)  and  scheduled  offences  under  the  Prevention  of  Money  Laundering  Act, 2002 (PMLA).
-  MCA  has  filed  Prosecution  against  companies  and  directors  as  per  the  law  for violations under various provisions of the Companies Act, 2013. MCA also conducts investor awareness programs in co-ordination with professional institutes and trade associations  to  educate  the  general  public  to  learn  from  websites  of  various Ministries the information published regarding the persons involved in the scheme, etc. before making any investment.
-  SEBI is empowered to examine complaints and pass orders under Sections 11 and 11B of the SEBI Act, 1992, directing companies/ directors / promoters to refund the amount  collected  from  investors  along  with  interest  at  15%  p.a,  and  debarring companies/  directors  /  promoters  involved  in  such  cases  from  accessing  the securities  market  for  a  specified  period.  SEBI  is  also  empowered  to  regulate Collective Investment Schemes (CIS) under Section 11AA of the SEBI Act, 1992.