SEBI-recovery of dues
- November 3, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
SEBI-recovery of dues
Subject : Economy
The Securities and Exchange Board of India (Sebi) has segregated dues to the tune of ₹67,228 crore under the “difficult to recover” category at the end of March 2022.
- It includes –those who failed to pay the fine and fees due to the markets watchdog, and those who did not comply with SEBI’s direction to refund investors’ money.
- A huge portion of the total pertains to Collective Investment Scheme (CIS) and those due to the parallel proceedings before various courts and court-appointed committees.
Recovery and Refund by SEBI:
- DTR dues are ones that could not be recovered even after exhausting all the modes of recovery
- Segregation of dues as DTR is purely an administrative act and this will not preclude the recovery officers from recovering the amount.
- Sebi is empowered to recover penalties imposed by the adjudicating officer, the amount directed to be disgorged, and the money ordered to be refunded to the regulator.
- The Recovery and Refund Department deals with recovery proceedings against the defaulters who have failed to pay the penalty, fees, disgorgement amount or monies directed to be refunded to investors and refund of such monies.
- Recovery Division 1-The Division handles work related to:
- Policy matters related to recovery and refund
- recovery cases where the principal amount exceeds one crore and refund related work
- litigation related to recovery
- coordination with the Recovery Officers (ROs) posted at regional offices and maintaining centralized databases.
- Recovery Division 2-The Division handles work related to:
- Recovery cases where the principal amount due is up to Rupees one crore.
- Litigation related to recovery;
- Wadhwa committee related refund work in IPO matters..
- Recovery Division 3-The Division handles work related to:
- Certain assigned recovery cases where the principal due amount exceeds Rupees one crore and refund related work;
- Recovery cases where the principal amount due is up to Rupees one crore;
- Litigation related to recovery.
- Special Enforcement Cell-The Division handles work related to refund and litigation of Sahara Matter.
Collective Investment Scheme (CIS):
- Under the Securities Laws (Amendment) Act 2014, when a corpus amount of Rs 100 crore or more is gathered from investors, it is referred to as a Collective Investment Scheme.
- A collective investment scheme is one in which a group of people pool their money and invest it in an asset.
- The asset’s returns are then shared among the group based on their share of the total investment.
- According to Section 11AA of the SEBI Act, CIS is any scheme or arrangement that meets the following criteria:
- the contributions or payments made by the investors, by whatever name called, are pooled and used solely for the purposes of the scheme or arrangement;
- the contributions or payments are made to such scheme or arrangement by the investors with the intention of receiving profits, income, produce, or property, whether movable or immovable, from such scheme or arrangement;
- the property, contribution, or investment that forms part of the scheme or arrangement is handled on behalf of the investors, whether identifiable or not.
- A Collective Investment Management Company is a business entity formed under the Companies Act of 1956 and registered with SEBI under the SEBI (Collective Investment Schemes) Regulations of 1999 with the purpose of organizing, operating, and managing a Collective Investment Scheme.
- A copy of the scheme’s offer document must be filed with SEBI, and if no changes are proposed by SEBI within 21 days after filing, the Collective Investment Management Company may disseminate the offer document to the general public for the purpose of raising money.
Structure of a CIS
- According to the Collective Investment Scheme Regulations of 1999, the CIS must be set up as a trust.
- The Trustee follows the established laws and regulations and works for the interest of the unitholders, safeguarding the assets and ensuring compliance.
- The Collective Investment Management Company appoints the Trustee who is in charge of the CIS’s assets.
- Fund Manager
- The fund manager, as the name implies, is in charge of the CIS’s funds and oversees and controls all of the CIS’s investment decisions.
- The fund manager is also responsible for the following tasks:
- scheme unit pricing
- valuing the scheme
- managing the scheme’s portfolio
- Individuals that combine their money into the plan are referred to as shareholders.
- As a result, individuals have a right to collect the investment returns as well as a right to the asset to the amount of their share and on the basis of the agreement signed when they joined the scheme.
Schemes that are not treated as CIS
- any scheme or arrangement developed or offered by a co-operative society;
- any scheme or arrangement under which non-banking financial companies accept deposits;
- any scheme or arrangement providing for any Scheme, Pension Scheme, or Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952;
- any scheme or arrangement in which deposits are accepted under section 58A of the Companies Act, 1956;
- any scheme or arrangement in which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956.
- any scheme or arrangement falling within the meaning of Chit business as defined in the Chit Fund Act, 1982.
- any scheme or arrangement under which contributions made are in the nature of subscription to a mutual fund.