The EOW (economic offences wing) of Mumbai Police and the ministry of corporate affairs (MCA) are separately investigating several MLM (Multi Level Marketing) companies. This action is taken by largely on the basis of complaints from individuals who invested money in them.
The EOW is preparing a report on the companies being investigated. It has till 7 September, 2011 to meet a deadline set by the Bombay high court and detail the preventive steps it proposes to put in place to deal with multi-level marketers.
The investigations come in the wake of a public interest case filed against multilevel marketer Speak Asia Online.
On 24 August, the court directed the police to file a reply by 7 September, 2011.
Meanwhile, after initiating an investigation against Speak Asia by the Serious Fraud Investigation Office (SFIO) earlier this month, MCA plans to investigate some other multi level marketing companies.
While SFIO investigation on Speak Asia is on, the ministry is watching some other MLM companies, which may be involved in dubious activities and making big promises to people who invest money in them.
Multi-level marketers typically run a network where sellers of the company's product or service, in turn, hire more sellers. These sellers or agents earn money not only from the products and services they sell, but also from the products and services the people they hire sell. Some multi-level marketers require sellers to pay a sub stantial amount upfront to enter the network they get some products in return and effectively function as Ponzi schemes with individuals in the network earning money as long as the network keeps growing. The people at the apex of the network, the promoters of the firm, earn the most. Such multi-level marketing firms are also called direct selling or referral companies.
India's rules regarding the operation and regulation of multi-level marketers is unclear and several individuals who have burnt their fingers
with investments in such companies have complained to various bodies. MCA itself has received several complaints.
EOW was investigating several companies apart from Speak Asia.
The EOW is preparing a report on the companies being investigated. It has till 7 September, 2011 to meet a deadline set by the Bombay high court and detail the preventive steps it proposes to put in place to deal with multi-level marketers.
Dubious activities - big promises
The investigations come in the wake of a public interest case filed against multilevel marketer Speak Asia Online.
On 24 August, the court directed the police to file a reply by 7 September, 2011.
Meanwhile, after initiating an investigation against Speak Asia by the Serious Fraud Investigation Office (SFIO) earlier this month, MCA plans to investigate some other multi level marketing companies.
While SFIO investigation on Speak Asia is on, the ministry is watching some other MLM companies, which may be involved in dubious activities and making big promises to people who invest money in them.
What is Multi-level market?
Multi-level marketers typically run a network where sellers of the company's product or service, in turn, hire more sellers. These sellers or agents earn money not only from the products and services they sell, but also from the products and services the people they hire sell. Some multi-level marketers require sellers to pay a sub stantial amount upfront to enter the network they get some products in return and effectively function as Ponzi schemes with individuals in the network earning money as long as the network keeps growing. The people at the apex of the network, the promoters of the firm, earn the most. Such multi-level marketing firms are also called direct selling or referral companies.
India's rules regarding the operation and regulation of multi-level marketers is unclear and several individuals who have burnt their fingers
with investments in such companies have complained to various bodies. MCA itself has received several complaints.
EOW was investigating several companies apart from Speak Asia.
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