Law Against Ponzi Schemes

Banning of Unregulated Deposit Schemes Act, 2019 seeks to prevent unregulated entities from collecting deposits and cheating and exploiting the poor and the gullible public of their hard earned money and punish the former.

It gives powers to the government to prohibit companies from taking such funds from the public. 

Anyone can be put behind the bars and given strict punishment for the following fraudulent activity:

• Running such illicit deposit-taking schemes or
• Making any deceptive statement or 
• Stating misleading facts to induce another person to invest in or participate in any unregulated deposit scheme 

Accepting unregulated deposits will be punishable and can also lead to imprisonment, along with fines ranging between ₹3 lakh and ₹5 lakh. 

Repeat offenders could face imprisonment between 5 and 10 years, along with a fine amounting to ₹5-10 crore.

It thus provides for a mechanism to ban unregulated deposit schemes and protect the interests of depositors.  It amends three laws

• Reserve Bank of India Act, 1934, 
• Securities and Exchange Board of India Act, 1992 and the 
• Multi-State Co-operative Societies Act, 2002.

It is a remedy to the ponzi schemes- financial frauds like Illicit deposit taking firms, in the country which at present are exploiting regulatory gaps and lack of strict administrative measures.