An inter-ministerial group will discuss issues related to foreign investment by companies in multi-level marketing, a methodology that was allegedly used by firms such as Speak Asia to cheat investors of crores of rupees.
The Foreign Investment Promotion Board (FIPB), according to sources, will deliberate on the perils of allowing FDI from companies in multi-level marketing, under which a person is required to enroll members to sell products and services.
The issue is listed in the agenda of the August 24 meeting of FIPB, which is headed by Economic Affairs Secretary Arvind Mayaram, and comprises representatives of ministries concerned. The FIPB is responsible for approving proposals of foreign investment in sensitive sectors.
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Recently a study by the Ministry of Corporate Affairs has cautioned people against joining multi-level product marketing schemes, saying such programmes are primarily meant to con individuals to the benefit of a few sitting at the top of pyramid.
According to the study, the pyramid or multi-level marketing schemes are “over-priced” to pay huge commissions to people sitting at the top of pyramid and earn exorbitant profits for the company.
Most recently, multi-level marketing company Speak Asia Online and chit fund company Gold Quest International have come under the radar of investigation agencies.
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Singapore-based Speak Asia was accused of duping investors to the tune of Rs.1,300 crore.
Besides multi-level marketing issue, the FIPB is likely to decided on as many as 48 applications of foreign direct investment (FDI).
About 10 FDI applications of pharmaceutical and healthcare companies too will come up for scrutiny.
Applications of Unitech Wireless (Tamilnadu), Sterlite Networks (Dadar and Nagar Haveli), D B Corp, Wall Street Journal India Publishing, Tara Aerospace Systems and City Union Bank, are other items on the agenda.