‘Rein in fraudulent financial pyramid schemes’

Published: 21st December 2012 10:54 AM  |   Last Updated: 21st December 2012 10:54 AM   |  A+A-

Indian Direct Selling Association (IDSA) has urged the government to make operational clarification between the fraudulent financial pyramid schemes and direct selling, multi-level business.

A discussion was organised here on Thursday by IDSA in association with PHD Chambers of Commerce and Industry and Assocham.

They pointed out that it should be treated as any industry which falls under civil liability.

Chavi Hemanth, secretary-general, IDSA, stressed the need to present the correct perspective to masses to help them differentiate between direct selling and fraudulent financial pyramid schemes offering overnight riches.

The fraudulent money circulation schemes operating under the garb of direct selling/multi-level marketing opportunities have been duping people.

IDSA demanded a robust regulatory framework to keep such fraudulent companies at bay and to protect and further harness the potential of the industry. IDSA and World Federation of Direct Selling Association clearly differentiates that companies offering remuneration based on recruitment are a sure indication of a money circulation and fraudulent scheme.

She also emphasised that direct selling was a business opportunity and not an investment opportunity.

Any company promoting instant financial gains within a very short duration of investing money is a fraud company.

 A Sengupta, vice-chairman, IDSA, stressed the need for an operational clarity between direct selling business and fraudulent financial pyramid schemes. He said that the payment in the form of commission recognises the value of the marketing and sales-support services provided by the sponsoring direct seller to their respective sales organisation.

S P Sharma, chief economist, PHD Chambers of Commerce and Industry, said that the industry had displayed a robust 27 per cent growth at Rs 5,230 crore in 2010-11 turnover. The growth in the segment has been contributed by 28 per cent growth in organised and 17 per cent growth in the unorganised segments of the industry.

D S Rajora, senior director, Assocham, said like retail, direct selling falls under the purview of state legislation and was governed by a large number of ministries/departments at the centre, state and local levels.  The multiplicity of regulatory bodies has resulted in multiple regulations governing this sector.

These should be streamlined for the smooth performance of this sector.

Chavi Hemanth said that subsequent to the issue of Kerala Guidelines in September 2011, IDSA had submitted their representation to these guidelines with a draft legal framework to the Chief Minister and industry secretary.

Despite advent of reforms in various segments of the economy no legislation or policy framework has been carved out to tackle the problem of fraudulent financial pyramid schemes.

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