As various ponzi schemes continue to defraud investors of hard-earned money, the government is seeking details from industry and regulators abroad about practices being followed there to check the menace.
A move is on by the government to amend Prize Chits and Money Circulation Schemes (Banning) or (PCMCSB) Act. The comments on the amendments and the international legal and regulatory framework for regulation of Multi Level Marketing (MLM) companies and pyramid marketing companies have been obtained by the Department of Financial Services (DFS), official sources said.
The DFS has proposed for a comprehensive cabinet note and legal amendments after obtaining more industry and regulatory practices around the world independently. The process of getting details of global industry and regulatory practices is underway, they said.
The DFS has earlier circulated draft amendments PCMCSB Act, 1978, to various law and enforcement agencies for their views. Their views have been received and are being examined by it, the sources said.
The government was also considering forming a central nodal agency to deal with all kind of ponzi schemes, they said.
A typical ponzi scheme involves the operator collecting a large amount of money from investors and paying them returns from their own money or the money collected from subsequent investors, rather than from profit earned by the person or entity operating such a scheme.
Such activities came to be known as ponzi schemes after Charles Ponzi, who became notorious in the US in the 1920s for deploying this technique while promising 50 per cent return on investments in 45 days and 100 per cent within 90 days.
View-Source: Business Standard News
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