NEW DELHI, November 18: The Securities and Exchange Board of India (SEBI) will formulate draft regulation for entities issuing investment instruments like agro bonds and plantation bonds.

The decision to entrust the task of formulating regulations for issuers of agro bonds to SEBI was taken by the government recently with a view to protecting the interest of investors.

Meanwhile, the government in consultation with the regulatory authorities has decided to treat such schemes as "collective investment schemes" under the provision of section 11(2)C of the SEBI Act.

According to an official press note issued on Tuesday, for long the government had been concerned about the need to regulate entities which issue instruments such as agro bonds etc. in view of the high elements of risks associated with such schemes. While the instruments might be funding agro based investment activities, it was observed that they offer very high rate of returns not consistent with normal returns in such activities.

The press note adds, in order to ensure that investors make investment decisions with the full knowledge of the risks involved, government has felt it necessary to put in place an appropriate regulatory framework.

In a bid to regulate such collective investment schemes, both from the aspects of investors' protection as well as allowing legitimate investment activities to take place, SEBI would first formulate draft regulation for the purpose. These draft regulations would be made available for public discussion.

It has also been decided that investors who had invested in such schemes as well as entities running such schemes would be requested to give comments on pertinent matters to SEBI so as to enable authority to formulate appropriate regulation for collective investment schemes.

It is hoped that once these regulations come into force, it will help in promotion of legitimate investment activities in plantation and other agriculture based business while at the same time give investors an adequate degree of protection for their investments.

The government, it may be mentioned, had held detailed discussions before finally deciding to have a regulatory framework for entities which issue instruments such as agro bonds, plantation bonds etc.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.