NEW YORK, June 18: With an aim to segregate the genuine multi-level marketing companies from those operating fraudulent ponzi schemes, the corporate affairs and consumer affairs ministries are working on a clearer set of rules for such businesses.
“While we must take strong action against the companies that are misusing the laws and duping investors, reputed companies that are doing good work and did not violate any Indian laws should be allowed to operate without any fear. They must be given confidence,” Corporate Affairs Minister Sachin Pilot told PTI in an interview here.
The Indian minister is on an official visit here.
The minister’s comments come against the backdrop of the recent arrest of global direct selling major Amway’s India Chairman William S Pinckney and two company directors by the Kerala police over allegations of fraud.
While they were released later on bail, the incident has generated a debate on need for a clear set of rules for differentiating between registered companies doing genuine businesses and those duping the investors through fraudulent schemes structured like multi-level marketing operations.
“My Ministry (Corporate Affairs) and Ministry of Consumer Affairs are now working on clarifying these guidelines (for multi-level companies),” Pilot said.
Stressing on the need for protecting investors against fraudulent entities, the Minister said the newspapers also have a larger role to play as watchdogs and should not entertain paid advertisements from illegal companies.
“Sometimes newspapers publish advertisements placed by companies running illegal schemes to dupe the investors.
“The newspapers have a larger role to play in being watchdogs of investors and refuse such paid advertisements in the best interest of readers. Companies must deliver what they promise,” Pilot said.
Describing the Amway incident as an unfortunate one, Pilot said: “When an incident happens, sometimes we fail to understand details and violations committed. We need to have more clarity in the operations of multi-level marketing companies in India.
“We must be able to segregate good companies and bad companies. If we look at everybody through the same prism, we are not doing justice to either of them,” he said.
According to him, when there is ambiguity then there is scope for misuse both by judicial officers and the company as well.
“We will be able to demark very soon these regulations so that incidents such as these do not happen in the future… Sometimes in the judicial process things happen that may not yield the best results but I am sure the facts will come out very soon,” he added.
Pilot observed that the perception coming out of the Amway incident sent wrong signals to those investors who want to come to India.
Stating that these things tend to stay in people’s mind for a longer time, Pilot said, “we must assuage their feelings not with mere statements but by our actions”.
The new Companies Bill, which is awaiting Rajya Sabha approval, has proposed new measures to ensure better disclosure, transparency and corporate governance.
“What is required is swift punitive action once fraud is detected,” Pilot said. (PTI)
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