Regulator probing jewellery houses for violation of collective investment scheme rules, says Shrimi Choudhary.
The Securities and Exchange Board of India is examining gold savings schemes offered by jewellers to check whether such offerings are flouting regulations on collective investment schemes.
Sebi is gathering brochures and pamphlets from at least a dozen jewellers, including Tanishq (a Titan company), Gitanjali Gems and PC Jeweller, which operate gold deposit schemes.
“Sebi has a view that jewellers have worked around the regulations and have launched new schemes that do not adhere to the rules,” said a person familiar with the development.
According to the rules, any scheme offered by a company in which the contributions by investors are in excess of Rs 100 crore and are pooled and managed on their behalf with a motive to earn profit is construed a collective investment scheme and requires Sebi registration and approval.
Collective investment schemes are regulated by Sebi, while the Reserve Bank of India regulates non-banking finance companies.
Most jewellery firms said the schemes were designed to help customers plan their gold purchases in advance and such schemes should not be equated with collective investment schemes.
“Our company took the lead in proactively clarifying with the ministry of corporate affairs whether its Golden Harvest Scheme was covered under the Companies Act, 2013,” said the spokesperson of Titan, owner of Tanishq. “On clarification, we suspended the scheme and started a new scheme after necessary approvals from our board, our shareholders and also after an application to the Registrar of Companies. The new scheme is fully compliant with the new Companies Act.”
Emails to Gitanjali Gems and PC Jeweller went unanswered.
The matter first came to light in 2014 when the government noticed that jewellers were collecting money as non-banking finance companies and brought installment schemes under the definition of public deposits.
Under the new rules, the effective return on the deposits cannot be more than 12 per cent and the amount of deposits has to be within 25 per cent of the company’s net worth.
In the case of many jewellers, the effective return was as high as 17 per cent.
The matter is not just restricted to a violation of the Companies Act. There are concerns some jewellers may have raised Rs 1,000 crore through such schemes.
“While many gold schemes could be pure private commercial contracts requiring no oversight by Sebi, others appear to be collective investment schemes under Section 11AA of the Sebi Act, 1992. Sebi’s concern is to examine if the amounts raised are earmarked for the customer. Since the law is drafted widely, each scheme needs to be examined,” said Sumit Agrawal, a former Sebi official and founder of Suvan Law Advisors.
The number of gold schemes nationwide is not known. However, estimates suggest at least 100 such schemes could have raised Rs 100 crore or more.
Sebi is not looking at smaller jewellers who do not fall under the Rs 100-crore ambit, but offer schemes where individuals contribute instalments as low as Rs 100 a month and promise returns depending on the price of gold.
Industry experts also said that some jewellers had tweaked older schemes that had put them in a spot with the regulator.
“Jewellers are still running the old schemes but they have corrected the terminology to what is legally allowed,” said an expert.