The Centre has proposed state governments to ban all companies
running schemes which offer monetary benefits to subscriber for
enrolling members to their scheme.In effect, all companies, firm or business associations in any
form or individuals will not be allowed to run a scheme “with a
compensation plan in which the subscribers would compulsorily have to
enroll certain minimum number of subscribers to become entitled to
monetary benefits or link the monetary benefits or commission to the
subscribers”.
The proposal is a part of the centre’s effort to curb the menace
of ponzi schemes, which has flourished in the country due to absence of
regulatory oversight, the most recent and bizarre
being the case of
Gurgaon-based Beetal Livestock & Farm which had promised its
investors a return of 2 per cent per month, and that too by rearing
goats. Suspecting foul play, market regulator Sebi issued show-cause
notice to the company that returned undelivered.
After the case of alleged fraud committed by Singapore-based
multi-level marketing (MLM) portal SpeakAsia Online, the government
started the process of reining in such companies which offered
impossibly high returns in a very short span or offered huge benefits
for enrolling more subscribers.
An inter-ministerial committee comprising the Reserve Bank of
India, and ministries of consumer affairs, corporate affairs, finance
and law, was formed to look into the matter. It suggested setting up of a
central agency to oversee MLM schemes and also proposed to filter and
block websites above a certain number of subscribers to curb such
schemes.
“In fact, we are working on bringing in these companies under the
Companies Act. This is possible under section 583 of the act where such
unregistered companies will be considered deemed registered, thereby
bringing them under the MCA’s purview,” a government official told the
Indian Express.
The MCA has circulated The State Money Circulation Scheme
(Banning), 2012, among states, where it has also suggested that the
nodal police authority in the state would be responsible for interacting
with other states for information on such companies while the central
government and concerned departments will furnish information regarding
these companies to the Reserve Bank of India.
However, other investigating agencies will also have the
authority to get information from states governments and other agencies.
The MLMs do not fall under the direct jurisdiction of any
regulator or department and hence is not effectively monitored. The
ministries of finance and home and regulators including the RBI and Sebi
have already conveyed that they don’t look into the matters concerning
MLMs.
Earlier, in India, MLMs such as Pinnacle Education and
Opportunity Ltd, Gurudev Travel Connection, City Limousine and
Kanakdhara Gold have been probed for alleged frauds.
Ponzi schemes
* After the case of alleged fraud by SpeakAsia Online, the
government started the process of reining in companies which offered
impossibly high returns in a short span
* An inter-ministerial committee suggested setting up of a
central agency to oversee MLM schemes and proposed to filter and block
websites above a certain number of subscribers
* Companies will not be allowed to run a scheme with a
compensation plan in which the subscribers would have to enroll minimum
number of subscribers to become entitled to monetary benefits
Source : Indian express
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