Lok Sabha Question No. 3771 (UNSTARRED), answered on 2017-03-24
Subject: Draft Law on Ponzi Schemes
Ministry: FINANCE
Asked by: SUSHIL KUMAR SINGH

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## TO BE ANSWERED ON FRIDAY, MARCH 24, 2017/CHAITRA 3, 1939 (SAKA)

## UNSTARRED QUESTION NO. 3771 DRAFT LAW ON PONZI SCHEMES

## 3771.SHRI SUSHIL KUMAR SINGH:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to tackle the menace of Ponzi schemes with stiff penal and monetary punishment for offenders by seeking comments from public on a draft law and if so, the details thereof;
- (b) whether the Government has constituted a group of domain experts to identify gaps in the existing regulatory framework for deposit-taking activities and if so, the details thereof;
- (c) whether the said group of experts has recommended a slew of measures both legislative and non-legislative and if so, the details thereof; and
- (d) whether  the  Government  proposes  to  bring  pyramid  marketing  companies  apart  from deposit taking firms under the new legislation?

## ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SANTOSH KUMAR GANGWAR)

(a) to (d): In view of the number of complaints with regard to the unauthorized deposit taking activities  and  duping  of  gullible  people  by  unscrupulous  elements,  the  Government  had constituted an Inter-Ministerial Group (IMG) in the Department of Economic Affairs (DEA), for identifying gaps in the existing regulatory framework for deposit-taking activities   and to suggest administrative/ legislative measures, including formulation of a new law, to cover all relevant aspects  of  deposit-taking.  The  IMG  finalized  its  Report  and  recommended  a  number  of legislative and non-legislative/ administrative measures. The IMG's legislative recommendations included the enactment of a new Central legislation called the Banning of Unregulated Deposit Schemes and Protection of Depositors' Interests Bill ('Banning Bill') in order to tackle the menace of illicit deposit taking schemes.

A  copy  of  the  Report  of  the  IMG  along  with  the  draft  'Banning  of  Unregulated  Deposit Schemes  and  Protection  of  Depositors'  Interests  Bill'  was  placed  on  the  website  of  the Department of Financial Services (DFS) in March, 2016 for eliciting public comments. Based on the comments received and further detailed consultations with the stakeholders, the Draft Bill  was  modified.  A  second  round  of  public  consultation  on  the  revised  draft  bill  has  been carried out by placing it on the web-site of DFS on 17.11.2016 and writing to all the relevant stakeholders.

The Department of Consumer Affairs has placed on its website an advisory to all the State Governments  /  Union  Territories  on  Model  Guidelines  to  strengthen  the  existing  regulatory mechanism  on  Direct  Selling  and  Multi-Level  Marketing  (MLM),  for  preventing  fraud  and protecting the legitimate rights and interests of consumers. The Clause 8 of the Advisory is on Prohibition of Pyramid Scheme & Money Circulation Scheme and states that (i) No person or entity shall promote a Pyramid Scheme, as defined in Clause 1(11) of the advisory or enroll any person to such scheme or participate in such arrangement in any manner whatsoever in the  garb  of  doing  Direct  Selling  business;  (ii)  No  person  or  entity  will  participate  in  Money Circulation Scheme, as defined in Clause 1(12) of the advisory in the garb of Direct Selling of Business Opportunities.