SFIO probing 187 companies running MLM schemes

The government has initiated investigations by the Serious Frauds Investigation Office (SFIO) into the working of 187 companies that have allegedly floated Ponzi, or multi-level marketing (MLM), schemes, Parliament was informed on Tuesday.

The government has received complaints regarding alleged collection of funds through MLM / Ponzi activities from the people in different states of the country, corporate affairs minister Arun Jaitley stated in the Rajya Sabha on Tuesday.

Ponzi schemes are fraudulent investment operations that lure investors with promise of high returns.

"The ministry has ordered investigation through SFIO under... The Companies Act into the affairs of 187 companies (as on April 13, 2016) against whom complaints had been received regarding alleged collection of funds through MLM/Ponzi activities in different states of country," Jaitley stated in a written reply to the Rajya Sabha.

Of these 187 companies, probe has been completed against 91 while investigation is 'under progress' in the case of remaining companies as per the list of companies provided by the minister.

These include companies like PACL, Sai Group firms (three), MPS Group (eight entities, including MPS Greenery Developers, MPS Food Products, MPS Resorts and Hotels), against whom complaints of financial fraud have been received, as per the list provided by the minister.

The list also includes several entities connected to Chakra group firms like Chakra Infrastructure, Chakra Agrotech, Chakra Wealth Management Advisory, Chakra Hotel and Leisure.

On steps initiated by the government to check such cases of deposit-taking activities and protect interest of investors,

Jaitley said, in order to deter such companies exploiting investors, 'fraud' as a substantive offence has been introduced in the Companies Act, 2013, while the SFIO has been granted statutory status under the Act.

Besides, the Companies Act includes stricter norms of corporate governance and their implementation, he added.

Measures to check deposit-taking activities and protect interests of the investors, include:

  • 'Fraud' as a substantive offence has been introduced in the Companies Act, 2013;
  • Statutory status to the SFIO has been granted under the said Act;
  • Companies Act 2-13, incorporates stricter norms of corporate governance and their implementation; and
  • Increasing application of technology for early/ preliminary identification of cases involving frauds through data analysis and usage of forensic tools, etc.

In a separate reply, Jaitley said an inter-ministerial group (IMG) has finalised its report and suggested enactment of a comprehensive central law - the Banning of Unregulated Deposit Schemes and Protection of Depositors' Interests Bill'.

The Bill has defined an unregulated deposit scheme and provides for penalty associated with schemes.

The IMG report and the proposed Bill has been circulated among state governments, union territories and regulators for their comments.

The IMG was constituted for identifying gaps in the existing regulatory framework for deposit-taking activities and suggest measures including formulation of a new law to cover all aspects of deposit-taking.

Finance minister Arun Jaitley to leave early morning tomorrow for a day's official visit to Frankfurt to participate in Annual Meeting of Board of Governors' of Asian Development Bank (ADB)

Jaitley will arrive early morning tomorrow at Frankfurt on a day's visit. Soon after his arrival in Frankfurt, the finance minister will attend the First Business Session of the ADB.

In his speech at the session, the finance minister would focus on the performance of Indian Economy in the period of global slowdown. He would highlight the micro and macroeconomic indicators of the economy. Cooperation with ADB in development will also be on his agenda.

The finance minister will also be meeting Hans-Joachim Fuchtel, parliamentary state secretary to German federal ministry for economic cooperation and development and discuss issues of mutual interest of India and Germany in ADB.