Yearender: Ponzi schemes stump investors, at least Rs 40,000 cr in limbo

Dec 30 2013, 11:39 IST
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Though there are no official figures, estimates peg the total amount involved in Saradha scam at about Rs 30,000 crore. (AP) Though there are no official figures, estimates peg the total amount involved in Saradha scam at about Rs 30,000 crore. (AP)
SummaryNot just greed, corporate governance lapses and regulatory loopholes provided scamsters leeway this year.

was asked to investigate 12 firms in 2011-12, the number of cases shot up to 46 in 2012-13 period. Summing up, as many as 134 cases came under the lens of SFIO alone in the last three years.

Amid seething public anger following Saradha scam, the Corporate Affairs Ministry ordered Serious Fraud Investigation Office (SFIO) to probe into 58 cases related to chit fund activities, including Saradha group entities, and a final report is expected soon.

Besides, an inter-ministerial group was set up with the mandate to frame regulations for clamping down on ponzi schemes.

Not satisfied with efforts taken with respect to Saradha fiasco, political pitch is getting shriller for a CBI investigation into the matter.

Amidst the rising din over fraudulent investment activities, the government is making efforts to ensure genuine schemes are not caught in legal ambiguities, especially against the backdrop of Kerala police action against global direct selling entity Amway in May this year.

The latest in the list is an alleged fraud committed by multilevel marketing firm QNet, although any official agency is yet to substantiate the allegations.

Going by studies, corporate frauds happen due to various factors including inadequate internal control procedures, diversion of funds by promoters or top management and failure of auditors in detecting the misdoings. Among them, lack of strong corporate governance is a key issue.

Nevertheless, the silver lining is the government's declaration that there has been no instance of Satyam like fraud since it came to light in early 2009.

The Satyam Computer scam, perpetrated by its founder B Ramalinga Raju, involved about Rs 7,800 crore and is still considered as one of the worst frauds seen by corporate India.

Meanwhile, faced with rising corporate misdoings as well as mushrooming ponzi schemes, multiple ministries and agencies are strengthening their watch.

Corporate Affairs Ministry, the repository of information about companies operating in the country, is working on boosting its fraud detection system while the SFIO too is focusing on similar initiatives.

Further, efforts are on to enhance regulatory co-ordination among various authorities including Sebi, RBI and the Corporate Affairs Ministry.

The new companies law has strong measures to prevent as well as clamp down on corporate misdoings and protect the interest of investors.

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