SEBI is in the process of framing the regulations for collective investment schemes. In order to examine the working of these schemes and also to understand the application of accounting standards by entities engaged in operating collective investment schemes, it was decided to conduct a special audit initially of those entities which had mobilised funds in excess of Rs. 5 Crores. 

SEBI engaged the services of RBI empanelled Chartered Accountants for the special audit. These chartered accountants were given the terms of reference which included verifying and segregating the amount mobilised from the public scheme wise and year wise, assets created out of each scheme, examination of accounting principles, detailing the salient features of each scheme and projected cash flow required to meet the return promised to the investors etc. 

It has been brought to the notice of SEBI that some entities are not cooperating with the auditors and have not produced the relevant books of Accounts and other documents required for the purpose of the audit. SEBI is taking a very serious view of these violations and is contemplating strict action against these entities including banning them from raising any further resources and also launching prosecution against these companies under the provisions of the SEBI Act. 

As a first step, show cause notice has been issued to 6 entities asking them to explain why action should not be taken against them for failing to comply with the directions issued by SEBI. 

Meanwhile apprehensions have been expressed in certain quarters that many entities engaged in operating collective investment scheme have not filed their information with SEBI thus trying to avoid regulations. SEBI is making concerted efforts in coordination with the Department of company affairs in identifying those companies which are registered with the various RoCs and are operating collective investment schemes. So far letters have been sent to more than 1200 companies who have been asked to explain whether they are collective investment schemes and if so the reasons for not filing information with SEBI.  

A Public notice is also being issued which would contain the names, addresses etc. of those entities which have filed information with SEBI. Investors are being advised not to invest any monies in any of the existing collective investment schemes unless the instruments issued by them are rated. Further, the members of the public are being advised to bring to the notice of SEBI, the names of companies/persons which are collecting or mobilising money from public without filing information with SEBI.