Averting Ponzi schemes

Averting Ponzi schemes

Ponzi schemes, bills

News:

• The Banning of Unregulated Deposit Schemes Bill, 2018 was approved by the Union Cabinet.

Important facts:

• Objectives:
• To provide comprehensive legislation to deal with illicit deposit schemes in the country.
• To protect the savings of the investors.
• The bill is aimed at tackling the menace of illicit deposit taking activities in the country.

Key features of the Bill:

• Unregulated deposit: The Bill imposes complete prohibition of unregulated deposit taking activity.
• Penalty: It provides for deterrent punishment for promoting or operating an unregulated deposit taking scheme, stringent punishment for fraudulent default in repayment to depositors.
• The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
• The Bill provides for attachment of properties/assets by the competent authority and subsequent realization of assets for repayment to depositors.
• Clear-cut time lines have been provided for attachment of property and restitution of depositors.
• The Bill enables creation of a central online database, for collection and sharing of information on deposit taking activities in the country.
• The Bill defines the “deposit taker” and “deposit”
• The primary responsibility of implementing the provisions of the proposed legislation lies with the State governments.
• The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme.

Types of offences:

• Running of Unregulated Deposit Schemes
• Fraudulent default in Regulated Deposit Schemes
• Wrongful inducement in relation to Unregulated Deposit Schemes.