Real estate firms under Sebi lens for fraudulent CIS
New Delhi: The Securities and Exchange Board of India (Sebi) has directed to put an end to Collective Investment Schemes (CIS) run by many real estate developers as it suspects investor frauds. It asked the firms to refund the money to investors within three months.
Numerous complaints have been lodged with the market regulator by investors being cheated by the real estate firms promising huge returns in the projects that were proposed to be developed from the scratch through public money.
Sebi, which is mandated to regulate the CIS entities, is presently investigating cases related to over 50 such developers, said an official. Most of these companies are operating in the northern and western states, while some of them are also active in West Bengal, Assam and other parts of the country, he added.
The regulator is enquiring whether these companies have registered themselves for operating CIS for such activities with the regulatory authority.
A CIS entity typically raises funds by attracting the public to invest in a real estate project or investment scheme proposed with the capital collected from a pool of investors and the returns are shared on pro-rata basis at a later stage.
In these kind of schemes, the firms attract investors into putting in their money for purchase of land and thereafter for development of projects and promise them that they will get huge returns at a later stage. They even offer to buy back the properties with considerable appreciation to the original investment.
From past many years, it is observed that many fraudulent CIS entities have been operating in the country. Most of them come into light only after duping the investors of their hard-earned money.
Sebi had taken actions against such fraudulent firms in the recent past for operating such unauthorised CIS schemes. It restrained and debarred Nicer Green Forest Ltd (NGFL) from accessing the securities market until the company stopped all its schemes and refunded the money raised through the schemes to investors.
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