Sebi directs QNET complaints to state government,
QNet and Vihaan Direct Selling have been accused of duping investors by offering to sell magnetic discs, herbal products, holiday schemes allegedly through fraudulent practices.
New Delhi: Capital markets regulator Securities and Exchange Board of India (Sebi) has forwarded complaints against QNET and Vihaan Direct Selling India Pvt. Ltd (VDSIL) for alleged multi-level marketing activities to state government authorities in Karnataka.
QNet and its Indian franchisee Vihaan Direct Selling have been accused of duping investors by offering to sell magnetic discs, herbal products and holiday schemes allegedly through fraudulent practices. They have also been accused of using the banned binary pyramid business model for its multi-level marketing (MLM) schemes to lure investors.
Sebi said its Bengaluru local office is regularly receiving complaints against activities carried on by QNET and Vihaan Direct Selling. In a message to investors, the regulator has advised victims of QNET and VDSIL to file their complaints with respective state governments or local police authorities for addressing their complaints.
“Sebi has noted that activities of QNET and VDSIL against which complaints are being received are akin to MLM activities and therefore, the same are being forwarded to state government and EOW, Karnataka, having jurisdiction to implement provisions of prize chits and money circulation schemes (banning) act, 1978 governing MLM activities in the nature of money circulation schemes, for further action as they deem fit,” it said.
The prize chits and money circulation schemes (banning) act empowers respective state governments and local police authorities to take action against MLM activities in the nature of money circulation schemes carried out in their territorial jurisdiction.
Asked about Sebi’s move, QNET told PTI that “vested interests have been writing to Sebi just to create an impression of wrong-doing. We were approached by Sebi and have clarified our business model to Sebi”.
“The government of India has recently issued guidelines governing direct or network marketing and our business is fully covered by it and is, therefore, fully legitimate. We are awaiting adoption of these guidelines by state governments,” the company said.
The company claimed that it does not have any investment schemes and said “activities of QNET and its associates do not violate any provisions of the prize chits and money circulation schemes (banning) act and rules made thereunder”. “We would like to mention here that Sebi clearly does not see a role to play in these complaints and is directing the complainants to approach the jurisdictional police to address these,” the company said.
QNET said it has been under investigation based on a false complaint. The investigations have been on for the past three years and till date no chargesheet has been filed.