Sebi and Rose hurl thorns in ad valley

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  • Published 21.05.13

Calcutta, May 20: The Saradha scandal has thrown up three entries from Bengal for Ripley’s Believe It or Not!

Entry 1: How does Sebi, the capital markets watchdog, crack down? It takes out advertisements in newspapers.

Entry 2: How do the companies respond? Put out a counter-advertisement. At least one has done so and another has vowed to follow suit.

Entry 3: What is the bottom line? In spite of the brouhaha over Saradha, people still deposit money with collection companies.

The Securities and Exchange Board of India (Sebi) had yesterday published a newspaper advertisement cautioning investors who are putting money in the schemes of the Rose Valley Group and MPS Greenery Developers.

“The general public are hereby cautioned that none of the companies of the Rose Valley Group have obtained a certificate of registration from Sebi to run a collective investment scheme to raise money from investors,” said the advertisement that was also published in The Telegraph.

Another advertisement said: “The general public is once again cautioned that MPS Greenery Developers Ltd does not have a certificate of registration from Sebi to operate a collective investment scheme and, therefore, cannot raise money from the public under any such scheme.”

Rose Valley struck back by putting out a counter-advertisement this morning, essentially saying that the matter is in court. “The advertisement of Sebi on 19th May, 2013, is an attempt to interfere into the administration of justice and, therefore, an act of contempt of court,” the Rose Valley ad said.

The ambit of the Sebi statement appears to cover all Rose Valley companies — something the group has contested.

“In January 2010, Sebi asked Rose Valley to submit balance sheets and auditors’ reports of about 16 companies under the group. However, in its final order in January 2011, it had only said one firm cannot run a collective investment scheme. Accordingly, we had moved Calcutta High Court, which is yet to come up with the final verdict,” a person representing Rose Valley said.

He appeared to be referring to Rose Valley Real Estate and Construction. A list of companies facing complaints, drawn up by the Union corporate affairs ministry, mentions at least 16 Rose Valley firms. The probe is still on and no indictment has been issued.

The person representing Rose Valley added: “The problem is on two counts — Sebi had abandoned its charges against other Rose Valley companies by excluding 15 firms. Besides, it has come up with an advertisement at a time the final verdict is yet to emerge.”

Countering the assertion, a senior Sebi official said from Mumbai: “It is our objective to make investors aware if a company raises money through CIS schemes without Sebi’s consent. We are aware of the court case but it must be noted that the court has not annulled the Sebi order and till a judgment comes up, the Sebi order stands.”

The Sebi official did not clarify whether the watchdog was investigating the other Rose Valley firms listed by the Union ministry.

The Rose Valley representative said: “We had stopped the scheme in question as early as December 2010. The firm is now running only a time share travel scheme on which there are no clear regulations.”

MPS chairman P.N. Manna, too, questioned the Sebi advertisement and said the company would come up with its response through advertisements.

“It is not clear why Sebi is coming up with such advertisements when we have orders of several courts, including district courts, to support us. We will issue advertisements in the next couple of days to allay the fears of our investors,” Manna said.

In a coincidence, Sebi chief U.K. Sinha told NDTV on the eve of the regulator’s silver jubilee celebrations today: “We have got a new set of problems in West Bengal… the district courts (have) started passing injunction orders against Sebi’s orders whereas my reading of the Sebi Act is that they have no jurisdiction. It was pointed out to them but they persisted, one district court after another. I think 10 or 11 district courts have passed orders against Sebi.”

“The action taken perhaps by the state governments could have been quicker and faster. I would say if those actions were taken in time, things would have been different,” Sinha said.

Sources said that although the Saradha scandal had had some impact, deposit collections had not dried up. “The flow of deposits is down by 30-40 per cent in some schemes. But even then, deposit mobilisation has not ebbed altogether,” said a source familiar with such collection initiatives.

Asked, Manna said: “It is true that the developments in the state and the subsequent Sebi advertisements had an impact. But we are reaching out to investors and trying to convince them.”