India needs to set up a regulator for direct selling industry, the Indian Institute of Corporate Affairs (IICA) has said in a new white paper.
The white paper on regulation of direct selling in India was launched here on Friday.
It also includes an exposure draft of a Bill prepared by former Law Secretary KN Chaturvedi.
It has also recommended a mandatory registration process — on the lines of mandatory SEBI registration for all schemes soliciting investments — for all direct selling entities operating in the country.
Central body The registration for players in the direct selling industry should be done through the proposed central regulatory body for the industry, it added.
A regulatory body will ensure appropriate protection for citizens by detecting and penalising unlawful activity, as well as enable legitimate activity to continue.
The white paper has also called for a “clear definition of direct selling” so that law enforcement agencies could easily differentiate between legitimate direct selling activities and ponzi schemes.
No dedicated legislation Any proposed definition of direct selling should also take into account interests of all concerned stakeholders.
Ideally, such a definition will broadly address aspects of the direct selling business model while excluding industries which are already regulated from its ambit, the white paper has said. At present, the country has no dedicated legislation in the arena of direct selling.
Entities are mostly regulated by individual States in a piecemeal fashion under several laws such as the Contracts Act, the Consumer Protection Act and the Prize Chits and Money Circulation Schemes (Banning) Act , 1978, which has banned ponzi schemes and fly-by-night operators.
The direct selling industry, which offered self-employment opportunities to as many as 96.3 million people in the country as of 2013, is projected to be worth $34 million by 2019-20.
Globally, the industry is estimated to be worth $185 billion as per various reports. Women comprise almost 58.3 per cent of the direct selling industry in India.