Govt panel for ban on defaulter MLM firms, blocking websites

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.

Incidentally, market regulator Sebi has asked the government to frame a strong central legislation to regulate companies running MLM and Collective Investment Schemes and to stop them from collecting large amount of money from the public without any requisite regulatory approvals and for dubious investment projects.

"People make all sorts of excuses - in some cases they claim they are under the state government, some cases they are saying they are registered with the Ministry of Corporate Affairs, some cases they are saying they are housing companies and in some cases they claim to be NBFCs," Sebi Chairman U K Sinha had said.

"And in most cases, they say that we are not under the Sebi jurisdiction," he added. 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. It has set up a computer lab to keep a tab on working of MLM companies.

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

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