In an attempt to curb chit funds & MLM ( multi level marketing) schemes, the SFIO (Serious Fraud Investigation Office) has recommended establishing an institution under the Centre’s ambit for stricter enforcement of laws.
According to an SFIO official “Bringing the cases under the Center’s ambit is crucial as some schemes being run with the direct or indirect help of local authorities is not unheard of.
However, the implementation should still be the states subject as MLM plans are mostly rural based and their designs vary from region to region”.
Another an SFIO official said. “The issue is that of signaling. Once the states along with the center start taking stronger action, the popularity of such schemes will fall by themselves”
At Present, such schemes are all banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. However, the Act is governed not by the center but by the state governments, some of which- such as Rajasthan and Tripura- haven’t even notified it yet. Moreover, only the state police authorities can mete out penalties. This comes in way of curbing such schemes.
The ministry of corporate affairs is now working with the RBI to strengthen the rules governing MLM firms. Chit funds or MLMs, a form of ponzi schemes, usually function as a cooperative where members make monthly deposits and at the end of every month they bid to acquire the collected sum.
Src: ET
Detailed report.!
According to very detailed report prepared by SFIO, it is being suggested that the central government monitor all MLMs— through the Enforcement Directorate & the Center Intelligence Bureau— to help oversee implementation of the laws across states.According to an SFIO official “Bringing the cases under the Center’s ambit is crucial as some schemes being run with the direct or indirect help of local authorities is not unheard of.
However, the implementation should still be the states subject as MLM plans are mostly rural based and their designs vary from region to region”.
Registration of all networking firms..!
The report further calls for the registration of all networking firms- under whose pretence most of the MLMs function- with the Central Authority.Another an SFIO official said. “The issue is that of signaling. Once the states along with the center start taking stronger action, the popularity of such schemes will fall by themselves”
At Present, such schemes are all banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. However, the Act is governed not by the center but by the state governments, some of which- such as Rajasthan and Tripura- haven’t even notified it yet. Moreover, only the state police authorities can mete out penalties. This comes in way of curbing such schemes.
The ministry of corporate affairs is now working with the RBI to strengthen the rules governing MLM firms. Chit funds or MLMs, a form of ponzi schemes, usually function as a cooperative where members make monthly deposits and at the end of every month they bid to acquire the collected sum.
Src: ET
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