Taking Steps To Curb Illegal Money Flow Into Penny Stocks: BSE

New Delhi: In a bid to prevent black money being invested in shares, India's oldest stock exchange BSE has created various price bands for scrips on weekly, monthly, quarterly and annual baseis for early deduction of illegal money flows.

"Over last one year...since September, in addition to daily price bands of 5, 10, 20 per cent, we have also created weekly price bands, monthly price bands, quarterly price bands and annual price bands," BSE managing director and CEO Ashishkumar Chauhan said here.

He was replying to a question on the Income Tax Department closely scrutinising high-value transactions and investments in penny stocks to identify potential black money holders who can avail the four-month compliance window ending September 30 to come clean.

The price bands, he said, can help identify potential inflow of large moneys in penny stocks through unusual movement in scrip price.

Citing an example, he said a company which is in the 10 per cent price band will not be able to move beyond a particular limit in the entire year "because most of the activity which were claimed to have been done under particular circumstances have completely been stopped".

In a bid to make the one-time, four-month compliance for domestic illegal wealth holders to come clean a success, the Income Tax Department has issued a serious of instructions to its officers for identifying potential declarants.

A list of cases related to penny stock transactions for assessment year 2009-10 to 2013-14 has also been made and asked its officials to share data on penny stock transactions with field formations.

Stating that there were lot of concerns expressed about black money flowing into stock markets, he said, "We have taken very very harsh steps to ensure that such activities do not happen)."

"Circuit limit has been imposed not only daily but also weekly, monthly, quarterly and year so if a stock which is Rs 1 will not be able to go Rs 200 within one or two years," he said.

He said the stock exchange's "regulatory strategy continues to evolve to ensure that whatever we do is defined in regulations, its transparent and fairly applied. We need to be very careful in framing our regulation so it is an evolving process."

He said BSE continues to "consult and engage and whatever is required to be done to make markets more safe, we would do whatever it takes to ensure that markets are safe for investors".

The price range set by BSE are in addition to the daily circuit filters or price bands imposed to restrict the movement of stock prices (up or down), of listed securities. 

The Budget for 2016-17 announced a four-month compliance window, allowing domestic black money holders to declare their unaccounted wealth, by paying a tax and penalty of 45 per cent and escape prosecution and harsher punishment. 

The window under the Income Declaration Scheme (IDS) 2016 will remain open from June 1 to September 30. Tax and penalty on income declared, as per the original scheme, is to be paid by November.