Says Sebi, ``Such advertisements are misleading as the investors have not been made aware of the implications and the likely risks of investing in these schemes.'' The companies have been given seven days to explain why action should not be initiated against them for violating the directions issued under the SEBI Act.

In a public notice early this week, Sebi had warned collective investment schemes against issuing any advertisement without displaying prominently the rating symbol and its definition/implications. This warning was issued inthe interest of investors and in pursuance of the directions of Bombay High Court.

The rating assigned to the four companies are below the investment grade and fall in the lowest rating category. The rating imply that the chances of default in these schemes are extremely high and this should be taken into account while making any decision to invest in these schemes. In fact, so far 11 plantation companies have been rated and all of them are below investment grade.

Meanwhile, Sebi has launched a programme to educate investors regarding collective investment schemes. Through a series of advertisements the market regulator has advised investors to exercise a great deal of caution while investing in plantation companies. According to Sebi, it is important to ensure that the scheme carries a rating from an accredited credit rating agencies. It is also important to understand the full impact of the rating and the risks involved in investment.

Warns Sebi, ``Do not get carried away by promises of high returnsand incentives, attractive brochure and pamphlets and post-dated cheques. Insist on physical verification of assets claimed to be owned by the company and check if the viability of the project has been established by a reputed appraisal agency.''