Mumbai: As Sebi widens its probe into use of stock market platforms for evading taxes and laundering black money, a large number of small NBFCs and brokers have come under its scanner for having facilitated illicit transactions worth thousands of crores of rupees over the past 2-3 years.
It has emerged during initial investigations by Sebi and stock exchanges that such illicit activities tend to accelerate during last few months of a fiscal and quantum of such transactions has grown manifold in the last few years.
Besides, a number of such entities, which includes both individuals and corporate brokerage firms, have been found to be repeat offenders for various offences in the securities market and many of them create new shell companies to hide their past precedents, sources said.
Those under the scanner also include select listed companies and their promoters, who regularly offer their services for channelising black money and for evading taxes through use of stock exchange platforms.
While it may be difficult to quantify the entire value of black money laundered through stock markets, as also the total tax amounts evaded through this platform, sources said that the total figure may easily run into thousands of crores of rupees given the spread of such illicit activities.
In just two cases, where Sebi last week passed interim orders, total illicit gains estimated worth Rs 500 crore have come to the fore in case of a select few entities.
Besides, being possible cases of money laundering or tax evasion, Sebi has found such activities to be securities market frauds as well, as they involve manipulative transactions in securities and misuse of the market.
In its biggest ever crackdown for suspected tax evasion and laundering of black money through stock trading platforms, Sebi on Friday barred 260 entities, including individuals and companies, from the securities markets.
While Sebi would further probe these cases, it has referred the matter to the Income Tax Department, Enforcement Directorate, Financial Intelligence Unit, among other agencies, for necessary actions on their part.
While 152 entities have been barred in one case relating to an entity named First Financial Services Ltd, another 108 entities have faced the action in a case related to Radford Global Limited.
The action came at a time when the government has sharpened its focus on unearthing black money stashed abroad and within the country, while Sebi also recently tightened its surveillance of shell companies created solely for the purpose of tax evasion or money laundering activities.
The modus operandi of such entities typically involves stock market dealings aimed at evading capital gains tax and showing the source of income as legitimate from stock markets.
In the First Financial case, the debarred entities include this company itself, its seven promoters and directors, 80 ‘preferential allottees’, 57 First Financial Group entities, as also seven others suspected to be related entities.