Govt finalising rules for multi-level marketing companies, stop corporate fraud

Oct 10 2012, 01:52 IST
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SummaryThe government today said it is close to finalising new rules for multi-level marketing firms and is working on an early warning system to prevent corporate frauds.

The government today said it is close to finalising new rules for multi-level marketing firms and is working on an early warning system to prevent corporate frauds.

The Serious Fraud Investigation Office (SFIO) -- under the Corporate Affairs Ministry -- is working on an early warning system that would help in preventing corporate frauds.

Corporate Affairs Minister Veerappa Moily said the SFIO has already set up a computer lab for this.

"This is part of the ministry's vision for having enlightened regulations," Moily said, while addressing the Economic Editors' Conference here.

The analysis wing of SFIO has come out with many reports and the ministry is acting upon that information, he added.

Besides, the ministry said the new rules for multi-level marketing companies have almost been finalised.

"We had a close discussion with the Department of Financial Services in the Ministry of Finance. The Act, the Prize Chits and Money Circulation Schemes Act (Banning) 1978, under which these activities can be controlled are under their purview," Corporate Affairs Secretary Naved Masood said.

"Together, we have decided that we should have new rules to prevent these companies from getting on with their nefarious activities," he added.

The new rules have been finalised and the RBI has been consulted on the same, Masood added.

Further, he noted that the Registrars of Companies (RoCs) have been asked to be "very very alert about the activities of these (multi-level marketing) companies, particularly where they give advertisements etc..."

SFIO is already investigating alleged scam at SpeakAsia, which is registered in Singapore. The ministry had ordered the probe into it early last year.

On the amendments to the Competition Act that were recently approved by the Cabinet, Moily said it would help in making the Competition Commission (CCI) more effective.

The amendments also propose a healthy relation between the CCI and other sectoral regulators, he added.

"Sectoral regulators will be required to compulsorily refer issues concerning competition which arise within their jurisdictions to the Commission with a corresponding responsibility on the Competition Commission to refer any issue relevant to the jurisdiction of a sectoral regulator to that regulator," he noted.

Further, Moily said the amendment seeks to enable laying down different thresholds for different classes of enterprise to attract the jurisdiction of the Commission in matters of acquisitions and mergers.

"The measures recently announced to accelerate the pace of reforms has not only sent a positive signal to the corporate sector but also augur well for the economy as a whole,"

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