India's central bank on Thursday cautioned investors against multi-level marketing firms that promise high returns and run on hefty member susbscription fees, warning such offers could result in direct financial losses.
Multilevel marketing structures work on the principle of enrolling more members and a part of the subscription
amount is distributed among members at the top of the marketing pyramid.
"Any break in the chain leads to the collapse of the pyramid, and the members lower down in the pyramid are the ones that are affected the most," the Reserve Bank of India said in a circular on Thursday.
The central bank also said accepting money under such structures was a cognizable offence under the Prize Chit and Money Circulation (Banning) Act of 1978.
Source:
© Copyright 2024 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
India's central bank on Thursday cautioned investors against multi-level marketing firms that promise high returns and run on hefty member susbscription fees, warning such offers could result in direct financial losses.