On the basis of specific complaints received in the Ministry, Regional Directors (RDs) and Registrar of Companies (RoCs) have been directed to Scrutinize the Balance Sheets and Inspect the books of accounts and other records under sections 234 and 209A respectively of the Companies Act, 1956 in respect of 87 companies, alleged to be carrying on the activities relating to prize chit fund and money circulation in the garb of multi-level marketing.
The Serious Fraud Investigation Office (SFIO) had recommended for setting up of a specific central regulatory agency for the implementation of the Prize Chit and Money Circulation Scheme (Banning) Act, 1978. This Act is administered by the Department of Financial Services, who has constituted an Inter-Ministerial Group consisting of the representatives from Department of Financial Services, Ministry of Corporate Affairs, Reserve Bank of India, Securities Exchange Board of India, Department of Consumers Affairs and Central Economic Intelligence Bureau (CEIB) to –
(i) Draft Model Rules on the Multi Level Marketing Companies and on the prohibited schemes under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978;
(ii) Frame clarificatory guidelines on how to distinguish between genuine direct sales from disguised money circulation Schemes.