Panel suggests tougher norms for multi-level marketing firms
Nov 18 2012
The inter-ministerial committee, set up to look into the matter, has also suggested setting up of a central agency to oversee multi-level marketing (MLM) schemes and framing of fresh guidelines for them by the finance ministry in consultation with the market regulator Securities and Exchange Board of India (Sebi) and other ministries and agencies.
Such schemes are also broadly known as ponzi schemes, wherein, money is pooled in by the operators from public for dubious investment purposes with a promise of hefty returns.
The committee, comprising of members from the Reserve Bank of India (RBI) as also consumer affairs, corporate affairs, finance and law ministries, also suggested that action can be taken against online companies like Speak Asia even if consumers do not complain against these entities, sources said.
The panel felt the need to check websites from operating from outside India and filters need to be placed at the point of gateway and the department of information technology can be asked to take necessary action in this regard, they added.
The panel has favoured nominating a central agency by the department of financial services with powers to probe such firms and to take legal action against the defaulters.
It has also been suggested that laws in other countries, such as China’s anti-pyramid statues and Singapore’s Multi Level Marketing and Pyramid Selling (Prohibition) Act can be consulted while formulating the guidelines in India.
However, the panel does not favour a central legislation to regulate MLM companies as the matter relates to the state governments and state police, which have sufficient powers to take action against such firms under existing regulations.
It observed that 14 states have already passed special acts to deal with MLM companies and other states can be asked to follow the suit, sources said.