Pyramid selling of financial products

Offence title:

Pyramid selling of financial products

Act:

12DK Australian Securities and Investments Commission Act

Offence:

(1)   A person contravenes this section if:

(a)   the person is the promoter of, or (if there are more than one) one of the promoters of, or is a participant in, a trading scheme to which this section applies; and

(b)   another person (the targeted person), who is a participant in that trading scheme, or has applied or been invited to become a participant in that trading scheme, makes any payment to or for the benefit of the person; and

(c)    the targeted person is induced to make the payment because the prospect is held out to him or her of receiving payments or other benefits in respect of the introduction (whether by himself or herself or by another person) of other persons who become participants in that trading scheme.

(2)   A person also contravenes this section if:

(a)   the person is the promoter of, or (if there are more than one) one of the promoters of, is a participant in, or is otherwise acting in accordance with, a trading scheme to which this section applies; and

(b)   the person, by holding out to another person (the targeted person) the prospect of receiving payments or other benefits in respect of the introduction (whether by the targeted person or by another person) of other persons who become participants in that trading scheme, attempts to induce the targeted person:

                                           i.         if the targeted person is already a participant in that trading scheme, to make any payment to or for the benefit of the promoter or any of the promoters or to or for the benefit of a participant in that trading scheme; or

                                         ii.         if the targeted person is not already a participant in that trading scheme, to become such a participant and to make a payment of a kind mentioned in subparagraph (i).

(3)   A person (the promoter) also contravenes this section if the promoter promotes, or takes part in the promotion of, a scheme under which:

(a)   a payment is to be made by another person (the targeted person) who participates, or who has applied or been invited to participate, in the scheme to or for the benefit of the promoter or another person who takes part in the promotion of the scheme or to or for the benefit of any person other than the targeted person who participates in the scheme; and

(b)   the inducement for making the payment is the holding out to the targeted person the prospect of receiving payments from other persons who may participate in the scheme.

Penalty:

2,000 penalty units

Summary/Indictable/mixed:

Summary

Jurisdiction:

Local Court

How committed:

(1)   A promoter promises person A referral payment if they convince person B to enter the scheme;

(2)   A promoter promises convinces person A to pay them money on the basis person A will benefit from the introduction of others to the scheme;

(3)   A promoter convinces person A to make a payment for the benefit of the promoter (or another) and the inducement is to convince A they will benefit from others making payment into the scheme.

Important note:

Limitation period: 3 years