The Securities and Exchange Commission of Pakistan (SECP) has introduced new regulations to prohibit Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM) and unlawful referral marketing activities. The Companies (Prohibition of Unlawful Activities) Regulations, 2026 apply to local and foreign companies operating through physical and digital platforms, including websites, mobile applications and social media.
The regulations prohibit business models that generate income mainly through recruitment rather than genuine product sales, use funds from new investors to pay earlier participants, or promise unrealistic and guaranteed returns. They also cover excessive joining fees, misleading product claims, hidden use of investor funds and schemes involving products with little or no genuine market demand. However, legitimate direct-selling businesses based primarily on actual sales to end consumers remain permissible.
Companies, directors and officers involved in prohibited activities may face penalties under Section 512(2) of the Companies Act, 2017, while further enforcement action, including winding up under Section 301, may also be taken. SECP Chairman Dr. Kabir Ahmed Sidhu said the regulations aim to protect the public from deceptive business practices and financial exploitation. The regulator has also advised people to verify companies before investing and remain cautious of schemes promising unusually high or guaranteed
