Investment Schemes

9 years, 8 months ago - April 03, 2013
The collapse of the investment scheme offered by the company Whitedot revealed several flaws in the system, both controllers as the lack of investor caution. Such plans take advantage of the naivety of gullible, shortcomings in the law, but a little depth and limited coordination between different regulatory bodies.

The government's goal is to encourage entrepreneurship through increased democratization of the Mauritian economy. But here we find contractors "ingenious" develop bad investment companies which operate on the principle of bait and switch.

Indeed, it is what it is: The Mauritian Ponzis. Some may well blame the regulatory authorities have failed in their duties by being unable to detect these subterfuges. But we must also recognize that the trend in the business world, and in the regulation, in the era of 'Business Facilitation’ is more towards the post-control, elimination of red tape and excessive facilitation.

Each controller has its specific features: The Financial Services Commission (FSC), for example, governs companies registered in it. So it would not necessarily be aware of any suspicious transaction by a company not registered in it, even if it takes a few steps from his office, as there is no complaint. And when a complaint arises, it is already too late because the damage has already occurred. On the one hand, we must improve the business climate to encourage investment, and the other, we are also obliged to be careful to prevent abuse. Authorities are faced with a dilemma: More regulation means less 'investor-friendly' and otherwise penalize us in various international rankings.

If for the Indian Finance Minister, P. Chidambaram, economic policy is for the welfare of the Indian people, and not to satisfy the rating agencies, at home, we have adopted a long line to constantly improve our position in the 'rankings'. Today, a company can be created in less than 24 hours and a permit issued within 3 days. All that to say that the risk of abuse also increases, hence the need for a 'post-monitoring, rigorous and regular.


The system is already in place since 2006. Simply extend to many other institutions, but also to ensure that it works well. The introduction of 'Business Registration Number' was precisely to connect online all public agencies to quickly share critical information in real time, avoiding the movement of files between different departments, under the concept of 'Moving Date Not People '.

Thus, once a company or a business incorporated in the Registrar of Companies, the data will automatically go to other institutions such as the Mauritius Revenue Authority, Social Security, local, etc.. The aim is, among others, to alert other agencies to ensure that each department knows what to expect. For example, under this system, the Department of Environment is already aware of the creation of a company operating an activity related to the environment and will require an EIA license. If the department does not receive any request from the company, then you must investigate. At one point, we even had heard of ‘e- Regulations Platform'. Similarly, if a newly created company aims to provide financial services, this information should land immediately under the FSC system.

'Ponzi' Scheme

Is a Ponzi scheme to be considered an investment plan? In fact, this activity is only collecting money and then redistribute it to the "Agents". There is no economic activity or production of goods and services to justify a return on the initial investment.

One can not help but wonder how many people fall into this trap. It is important to know that all Ponzi schemes are not the same. Their characteristics are different schemes that are difficult to identify. The only thing they have in common is the investment returns that seem too good to be true, for example, get double its investment in less than 6 months.

A Ponzi scheme is classic to perpetuate the "investment" of money, and then come up with fictitious profits. "Benefits" are actually other people's money. While the financial damage caused by this system can be large, regulators are almost powerless to fight. This is because there is no exact definition of a Ponzi scheme. Moreover, the contracts signed by customers clearly explain the risks and accept them. This perpetuation actually invests part of the money as promised. But the remaining investments are used to pay previous investors.

A simple example

Imagine an agent offers a 100% investment interest, you give him Rs 50,000, Rs 100,000 you back in three months. In fact, it does not give you the money deposited by subsequent customers. The system continues as customer flows. Often, the first customers back in the chain again. The system collapses when all agents are asking their money at the same time.

Financial regulation - The role of BOM and FSC

The  Whitedot case forced the Bank of Mauritius (BoM) and the Financial Services Commission (FSC) in front of the news. While questioning fuse on the inability of regulators to have detected this scandal from the beginning, the two institutions have each explained their position in relation to the scandal of Rs 700 million. One speaks limited powers to act, while the other has no control over the entities unregistered home.

Bank of Mauritius, governed by the Bank of Mauritius Act 1966, a primary objective is to protect the internal and external value of the rupee and create the necessary conditions through its monetary policy to foster economic growth. The Bank of Mauritius is the regulatory authority for commercial banks, leasing companies and traders.


Other functions of the central bank are:

  • Issue of currency (banknotes and coins)
  • Act as the bank of the State
  • Management of foreign exchange reserves and gold
  • Management of public debt
  • Formulate the monetary policy of the country
  • Determine the rate
  • Purchase and sale of securities (including treasury bills) on the interbank market
  • Lender of last resort for banks
  • Oversee the functioning of financial markets
  • Ensure regulatory compliance risk (solvency ratio) financial institutions (especially banks deposits);
  • Act as an intermediary for the payment of checks
  • Advise the government on monetary affairs

Note that the exchange control was abolished in 1994 and since then, it is the market forces that determine exchange rates. Similarly, bank interest are subject to the laws of the market. In short, the central bank no longer has direct control rather indirect money market, through its directives.

FSC - Regulating the financial sector

Founded in 2001, the Financial Services Commission (FSC), regulated by the Financial Services Act, is responsible for the non-bank financial sector. It regulates the stock market, listed companies, insurance companies, pension plans, financial and offshore sector. It is this institution which issues permits for any activity in the financial sector under various legislations such as the Securities Act, the Insurance Act or the Private Pension Schemes. FSC and oversees all activities carried out by companies registered in it.

Other functions include:

  • Make 'policies' to promote the financial sector
  • Identify new opportunities to further develop the sector
  • Ensure that the financial activities of companies registered occur transparently and according to the laws
  • Ensure the stability of the sector
  • Take the necessary measures to combat fraudulent financial activities
  • Begin the financial education of consumers through the dissemination of critical information and awareness campaigns


In November 2010, there was talk of merging the two institutions into a single regulatory agency to better meet market needs. The same institution had two objectives: to supervise the financial sector and promote services. The project seems to have been abandoned thereafter. We also hear from time to time of the advent of a Banking Ombudsman and a Financial Services Ombudsman. The role of the latter is to mediate disputes between customers and service providers. With the latest financial scandal to date, suggests that all things rush.

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