Ordinance to Ban Unregulated Deposit Schemes: Bridging the Regulatory Gap

[Anirban Roy Choudhury is a banking and finance lawyer and an LL.M. (Finance) candidate at the Institute for Law and Finance, Goethe University Frankfurt]   In spite of various legislation, including the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and the Chit Funds Act, 1982, being in place throughout the last few decades, various entities regularly lured the unwary public with very high returns and tempted them to invest in their Ponzi schemes. The Securities and Exchange Board of India (SEBI) also attempted to tackle the situation by introducing the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999. However, financial scams continued to be reported from various parts of India on a regular basis, of which the Sharda scam originating in West Bengal is a glaring example. It was clear that most of these Ponzi schemes and financial scams were orchestrated by entities who were completely outside the purview of the…

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