The Model Guidelines Issued for States to Curb Ponzi Schemes [ Current Affairs ]


Model guidelines “The Direct Selling Guidelines 2016 framework” have been issued for states by the Union Food and Consumer Affairs Minister Ram Vilas Paswan in New Delhi to standardize the level of direct selling and multi-level marketing businesses in order to keep the customer safe from Ponzi frauds.

Key features

  • The guideline model highlights direct selling as marketing, distribution and sale of goods or providing of services as a part of network of direct selling.
  • Pyramid and money circulation schemes differentiated as the legitimate direct selling to help investigating agencies identify fraudulent players.
  • Under Prize Chits and Money Circulation Schemes (Banning) Act, 1978 Money Circulation Scheme defined.
  • According to this guideline direct selling companies cannot charge any entry fee from agents or compelling them to buy back unsold stocks.
  • These entities and direct sellers or agents will signed an agreement to give full refund or buy-back guarantee for goods and services sold to them.
  • The direct sellers are also allowed to establish a grievance redressal committee to protect consumers’ right.
  • The down payment system will be also available for the person engaged in direct selling firms on distribution of incentives, profit and commission.
  • It also includes to Improvement of Provision for appointment of monitoring authority at both Union and state level to handle direct selling related issues.
  • Under the Prize Chit and Money Circulation (Banning) Act, 1978 the comment Ponzi schemes are barred.
  • The State governments are the implementation agency of this law.
  • The guidelines enable states to make some change in their guidelines as per their localized requirements.
  • It was essential for the better growth of the direct selling business.
  • This will be very helpful and consumers are safe as direct sellers can now be identified, and goods exchanged.

- Published on: September 14, 2016