Companies floating fraudulent investment deposits mobilizing schemes (also called ‘ponzi schemes’) under various guises are liable for action under the following laws:
(i) The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 administered by Ministry of Finance (Department of Financial Services) through the State Governments; and
(ii) Section 11AA of the Securities and Exchange Board of India (SEBI) Act, 1992 where such schemes are in violation of Collective Investment Schemes regulated by SEBI.
Giving this information in written reply to a question in the Rajya Sabha today, Shri Sachin Pilot, Minister of Corporate Affairs, said that the following actions have been initiated:
(i) Minister of Corporate Affairs has requested State Chief Ministers to issue instructions to State Police Authority for vigorous action under Prize Chits Act. The Minister has also written to the Finance Minister to increase the surveillance by RBI over unauthorized NBFCs.
(ii) Model rules under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 have been sent by the Ministry of Finance to State Governments for notification. This will enable initiation of action for ponzi schemes.
(iii) Stepped up surveillance by SEBI.
(iv) Campaigns by Ministry of Corporate Affairs, RBI and SEBI through advertisements and Investors Awareness Programmes.
(v) Investigation/Inspection in respect of 87 companies against whom complaints in such cases have been received.
(vi) The Market Research and Analysis Unit is in place in the Serious Fraud Investigation Office of the Ministry of Corporate Affairs for capacity building, coordination with other investigating agencies and for market surveillance.