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Following mails from Moneylife to SEBI and Tata Securities, the MLM scheme pages and ads of Blue Chip Infraprojects have disappeared from the Internet. Tata Securities has denied any association with the MLM company. Is there something seriously wrong somewhere?
In yet another stunning multi-level marketing (MLM) case where there are big promises of huge returns, the promoter company, Blue Chip Infraprojects Ltd, has removed all pages linked with its scheme from its website and a few ads from the Internet.
This follows a mail sent from Moneylife on 22nd June to Tata Securities Ltd and the Securities and Exchange Board of India (SEBI). While Tata Securities denied any association with Blue Chip Infraprojects, the SEBI said that it is examining the operations of the company. This also ratifies our belief that something is seriously wrong there.
The company claims to be engaged in real estate, information technology, logistics, shopping tourism, management consulting, portfolio management and investments. While the company, Blue Chip, has removed pages linked to its products, leader views and the business plan (which was only accessible to its members)-there are still plenty of ads for its MLM schemes and franchisees.
According to an ad posted at thetbi.com (which may soon disappear from the Web similar to other ads), for becoming a franchisee of Blue Chip, one requires an investment of Rs5 lakh to Rs15 lakh, depending on the location, an application fee of Rs25,000, office space of minimum 200 sq ft and a conference room facility for minimum 20 persons. The ad promises to pay or reimburse operational cost of Rs29,000 to Rs75,000 per month, for running the franchisee. It also promises a commission of 40% and shows earning capacity from Rs50,000 to Rs5 lakh every month. The ad says that these franchisees would be sold one per district and are sell product-wise sub-franchisees in their area.
Blue Chip also asks investors to invest money under the pretext of buying shares of the company with a return on investment (RoI) at 5% on the total amount invested. For example, according to its presentation, if an investor invests Rs10,000 then he would be issued 50 shares at Rs200 per share. The company promises to pay at 5% per month on this investment for around 36 months or till it comes out with an initial public offering (IPO). The presentation says that the company's IPO is expected in August 2013 "onwards".
In addition to the 5% RoI, there is the usual binary and residual income of 10% each (depending on the performance of your down-line), that the company promises to pay. According to the example given in the presentation, if the direct spill (down-line) invests Rs10 lakh, then his RoI would be Rs50,000 @5% and the promoter (you) would get 10% on this amount or Rs5,000 for the next 36 months!
Blue Chip also promises to pay a salary! Yes, it promises a 'salary' to its agents depending on the target achievement from Rs2,000 to Rs50,000 for over 12 months by giving fancy job titles like senior promoter, sales manager, branch manager, divisional manager and zonal manager.
Now comes the most interesting part. The company promises to pay brokerage income on shares trading up to 20 levels of binary income and says that the demat account (required for share trading) would be provided by Tata Securities Ltd. In an email reply, a spokesperson from the company said, "Tata Securities has no association with BC Infra (Blue Chip Infraprojects). We have initiated legal action (against BC Infraprojects)."
Similarly, in a reply to our mail, market regulator SEBI said, "We are examining the same as to any possible violation of SEBI (Portfolio Managers) Regulations, 1993."
There are two things that do not look good for the company. One, the company is openly collecting money from investors under the pretext of selling its own shares. Such activities also carry the features of a Collective Investment Scheme (CIS), specified under Section 11(AA) of the SEBI Act read with Regulation (3) of the SEBI (CIS) Regulations. Earlier in May, the market regulator has asked Sun-Plant Agro to wind up the company's CIS and refund the money collected in the name of 'sale of plants'.
Second, while Blue Chip is promising to open a demat account for the investor from Tata Securities, there is no clarity on how it would be operated. Whether the company would operate the account (trading) or the investor would be allowed to operate it and who would invest the additional money for share trading, there is no information available.
Moneylife has been writing about the dwindling investor population in the country. According to the Swarup Committee report (2009), on Investor Awareness and Protection, retail investors are bypassing the capital markets. The report said, "Today, there's an army of nearly 3 million financial advisers plus banking staff selling non-banking financial products. They serve about 188 million investors holding financial assets. Of these, 8 million investors participate in debt and equity markets, either directly or indirectly through complex and risk-bearing products like mutual funds and market-linked insurance plans."
The Swarup Committee report shows that the retail investor population has shrunk to less than half since 2000-01. (Read more…Wanted Retail Investors: To Invest in Mutual Funds, Shares, IPOs and NPS ). While the investor population in India fell to just 80 lakh investors, the dubious MLM companies are ensnaring gullible people with promises of huge returns. Take for example, Speak Asia, the online survey company has claimed to have 19 lakh panellists enrolled into its schemes.
In addition, while common people have been shying away from the markets, the avalanche of MLM schemes and companies like Blue Chip that promise huge returns from share market trading would further deter investors from markets.
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