New Delhi: Concerned over the rising menace of ponzi schemes, the government will bring in a new law to remove regulatory gaps in this regard, Finance Minister P Chidambaram has said.
"We are considering a law to fill the regulatory gap... We are trying to see that people do not take advantage of the regulatory gaps," he said.
The Minister said that it was presently possible for the companies to set up their illicit investment schemes in such as way so that they can avoid oversight by either of the regulators or the government departments.
"Right now, it’s possible to design your company in such a manner and carry on your business in a way that you do not classify as an NBFC, a chit fund, or any other regulated entity," Chidambaram said in an interview.
"These are regulatory gaps and what we are trying to do is to reduce these gaps to maximum possible extent, so that everyone falls either under the RBI, or SEBI, or the Registrar of Chits or under the state government, etc," he said.
The comments come in the wake of wide-ranging amendments proposed by the government to the SEBI Act and other regulations to give the capital markets regulator greater powers to deal with various kinds of investment schemes.
Asked whether the government would consider bringing in an ordinance for these amendments, Chidambaram said: "At the movement, we are considering a law. Now, what shape the law will take, I cannot say. That will depend on when the Parliament meets, among other factors."
A Cabinet note on a proposed Securities Laws (Amendment) Bill, 2013, has been circulated by the Department of Economic Affairs to other departments in the Finance Ministry, as also to the Corporate Affairs, Home, Law and Telecom ministries, along with to the Reserve Bank of India, Planning Commission and the Prime Minister's Office.
The Bill seeks to provide SEBI with direct powers to carry out search and seizure operations and for attachment of assets, as part of efforts to strengthen efforts to tackle perpetrators of ponzi schemes and other fraudulent activities.
Besides, the government has also proposed to give SEBI powers to seek information, such as telephone call data records, from any person or entity in respect to any securities transaction being probed by it.
Talking about multi-level marketing companies and the cases like Amway, Chidambaram said changes are also required in the regulations to safeguard the interest of genuine companies.
"The law perhaps requires to be amended to provide for the genuine multi level marketing which do not fall under the definition of illegal money circulation," he said on the case involving arrest of Amway India's Chairman and two directors in Kerala.
"Under the prevailing law, certain multi-level marketing schemes can be taken as to be illegal. So, it is possible that the state police took the view -- I am not saying whether it's correct or not -- that what the company was doing was illegal under the present law as interpreted by the court."
Chidambaram further said the arrest was probably "a bit over the top" as he was not running away and the police could have filed an FIR and investigated the matter.
Asked whether there was a case for having a longer tenure for persons heading regulatory authorities like RBI and SEBI, the Minister said: "Personally, I don't think there is a case for a longer tenure. I think a tenure of five years is a good tenure."