Finance Ministry for changes in Prize Chits & Money Circulation Act New Delhi:The department of financial services has proposed amending the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 to make inducement to persons for joining multi-level marketing, pyramid, Ponzi or collective investment schemes an offence to plug loopholes in money churning activities of companies. The department under the finance ministry has proposed to insert a new section 3A in the Act through an amendment Bill for this purpose. The existing provisions of the Act ban various fraudulent schemes and any person violating the provision is liable to be prosecuted and punished. However, it is possible that promoters of a fraudulent fund could take up a stand that the scheme is of a business entity and that they are mere employees, who are not responsible for the acts of the entity. To plug this loophole, the new section will ensure that persons who are promoters in such schemes are individually prosecuted and punished if they fraudulently or dishonestly induce persons to subscribe to or participate in such schemes. Besides Chits Act and Sebi Act, these schemes are currently covered under the RBI Act, 1934, the Companies Act, 1956, and state laws for protection of interest of depositors in the financial establishment. The Chits Act covers prize chits and money circulation schemes, but there is no specific reference to multi-level marketing schemes for goods and services in the Act. There are certain business entities, which launch schemes for appointing selling agents for their goods and collect registration fees from them with a further requirement that such agents have to appoint more agents collecting registration fees from them. The remuneration paid to the selling agents consists of a share in the registration fees collected from the new selling agents joining the scheme. Such schemes are known as pyramid, Ponzi or multi-level marketing schemes. Posted On: Jul 05, 2013 ,Source mlmclue
Posted on: Fri, 05 Jul 2013 06:27:44 +0000
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