2008 (10) TMI 717 - AT - SEBI

Tribunal upholds order for Collective Investment Company to wind up schemes due to non-compliance with regulations

The Tribunal upheld the order directing a Collective Investment Management Company to wind up schemes for non-compliance with provisional registration ... - Issues involved: Compliance with conditions of provisional registration, misleading information to investors, winding up of schemes.Compliance with conditions of provisional registration:The case involved an appeal by a Collective Investment Management Company against an order directing it to wind up schemes due to non-compliance with conditions of provisional registration. The company failed to appoint trustees, meet net worth requirements, and comply with various regulations. The auditors highlighted several non-compliances, including accepting funds without proper registration. The Tribunal found the company's actions to be in violation of regulations and upheld the order to wind up the schemes.Misleading information to investors:The Tribunal noted that the company issued misleading information memoranda to investors, falsely promising higher returns than what was actually offered. Small investors, particularly from remote villages, were deceived into remaining invested in the schemes. This misconduct was considered serious, leading to the decision to uphold the order for winding up the schemes. The company's misleading statements were deemed unacceptable, especially given the vulnerable nature of the affected investors.Winding up of schemes:Ultimately, the Tribunal dismissed the appeal, directing the company to wind up the schemes as per regulations and repay investors accordingly. The company was instructed to send revised information memoranda to investors after Board approval. Upon compliance, the Board was to release funds for repayment to investors. The Tribunal also ordered the company to bear the costs incurred by the Board in the legal proceedings.