Capital markets regulator SEBI on Monday asked the States to enact laws to ensure depositors' interests are safeguarded.
"SEBI Chairman U K Sinha suggested that the States enact depositors' investor protection laws and strengthen the enforcement mechanism," a release from the Reserve Bank said, quoting Sinha who was present at the 27th conference of state Finance Secretaries held here.
The chief of capital markets watchdog also informed the gathering about the recent changes made in the SEBI Act to curb unauthorised deposit schemes. Last week, SEBI directed PACL, a Delhi-based property developer, to return a whopping Rs 49,100 crore to depositors collected through an illegal investment scheme. The SEBI action comes on the heel of West Bengal's Saradha scam and schemes involving two Sahara Group companies.
Certain entities, which are out of purview of financial sector watchdogs, have often taken advantage of the regulatory loopholes to raise large amount of deposits. States like Tamil Nadu and Odisha have already enacted model Acts to take care of depositors' interests.
Sinha sought cooperation of the states in this initiative by conducting investor awareness workshops and training officials. Sinha also sought help from the states to curb the off-system "dabba trading", the RBI release said.
Chief Secretaries of 15 States and Finance Secretaries of 27 States and nine Union Territories attended the conference.