These schemes, much in the news since the Saradha scam, are those in which people invest to create

a pool of money which is then utilised to realise some income for the investors, or acquire some produce, or some properties which are then looked after by a manager of behalf of the investors.

In other words a property is owned by an individual, but is maintained jointly with the manager. A mutual fund is also called a collective investment scheme. SEBI introduced regulations for CISs in 1999. But so far only one company - Gift Collective Investment Management Co has registered with it as a CIS after complying with the regulations. This is a Gujarat government PSU which is building the International Financial City in the Ahmedabad-Gandhinagar region.

What the Saradha Realty saga teaches

Make the public at large more financial literate. Make it easier, not more difficult, for people to set up investment schemes. Let markets decide whom to trust and whom not to.

As far as possible, prevent political patronage for particular schemes. Ensure regulator itself has officers of high integrity. Provide conditions for financial mainstream activities across all regions and places in India.

SEBI needs to speed up its adjudication process. There has to be a central data information cell which is connected with all the law making agencies, there has to be coordination between them. There should be an investors' charter

SEBI has not been able to prevent the proliferation of unregulated CISs, it is because it does not have the teeth or the infrastructure to do so. Its staff and number of offices is severely limited, nor are its orders binding like those of courts. Most of the time it starts probes only after it has been tipped off by some enforcement agency.

whenever SEBI has asked companies running CISs or related schemes to refund money to investors, the latter have contested the order in court saying passing such orders was beyond Sebi's legal authority.

Banks too can be blamed for the malpractices CISs get away with.Why was no alarm raised when crore of rupees were coming into certain accounts every day? One reason cited is the poor surveillance system in banks at the district levels as compared to the cities.

As per amendments, the list of such practices would now include "illegal mobilisation of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any collective investment scheme by any person". Besides, an "explanation" has been inserted into these regulations to state that the list of such practices is not exhaustive in nature and the norms would be applicable to all categories of persons and entities. The amendment would allow the list of 'fraudulent and unfair trade practices' to remain open ended, rather than restricting it to 19 broad categories currently. Sebi has also decided to strictly enforce these norms, which cover a wide array of manipulative activities, such as publishing advertisements with misleading or distorted information to influence the investors' decision, planting of false or misleading news and inducing investors to carry out transactions for personal gains

With regard to illegal money-pooling schemes, the operators of such activities earlier faced a meagre fine of Rs. one crore and the same was not found to be sufficient to deter such unauthorised fundraising. A proposal to increase the penalty on such entities to Rs. 25 crore or three times of the profits earned through such schemes,