Indian stock market regulator the SEBI (Securities and Exchange Board of India has received investor complaints against about 100 unlisted companies, who have allegedly raised money from the public in violation of regulations, with promises of high returns.
Many of these firms are allegedly running CISs (collective investment schemes) without SEBI’s approval, while there are also MLM (multi-level marketing) firms and those promising high returns through investments in real estate, gold, art funds and foreign currencies. SEBI would impede the investigation process.
In most cases, the companies have pooled in money from investors for certain pre-specified purposes, with a promise to distribute the profit or / income among the contributors.
The investor grievance cell of SEBI has been flooded with such complaints especially after the recent Supreme Court verdict on Sahara group, whose 2 companies have been asked to refund nearly Rs. 24,000 crore to the investors within 3 months with interest of 15% per year.
The money was raised by the 2 unlisted Sahara companies through issue of instruments called OFCDs (optionally fully convertible debentures). The Sahara group has told the Court that it would refund the money within 3 months.
Although unlisted firms do not come under jurisdiction of SEBI, any issue of securities to 50 or more investors is considered as a public offering and requires SEBI's clearance.
Src: PTI
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