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ISLAMABAD: Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM), and unlawful referral marketing are all prohibited by the Companies (Prohibition of Unlawful Activities) Regulations, 2026, which were announced by the Securities and Exchange Commission of Pakistan (SECP).<\/strong><\/p>\n The regulations encompass schemes that operate through both physical and digital channels, such as websites, mobile applications, and social media, and they apply to all businesses, including overseas businesses.<\/p>\n According to the regulations, it is forbidden to make money primarily from recruitment rather than actual product sales, to pay earlier investors with money from new investors, to promise unrealistic or guaranteed returns, to impose excessive joining fees or inventory purchases, and to conceal the use of investor funds.<\/p>\n They also cover schemes involving products with little or no genuine market demand, misleading income or product claims, inadequate refund or buy-back arrangements, and the sale of unregistered, unapproved or illegal goods.<\/p>\n Pyramid schemes involving unclear contractual terms, unreasonable purchase requirements or multiple participation positions designed to generate recruitment-based rewards are also prohibited. Bona fide direct selling, where compensation is primarily derived from actual sales to end consumers, remains permissible.<\/p>\n The regulations extend to existing schemes exhibiting characteristics of unlawful activities, irrespective of whether they operate through physical or digital channels. Companies are prohibited from promoting, conducting or facilitating such activities. Violations may attract penalties against companies, directors and officers under section 512(2) of the Companies Act, 2017, as well as other enforcement action, including winding up under section 301.<\/p>\n SECP Chairman Dr. Kabir Ahmed Sidhu commented on the announcement, saying, \u201cThese Regulations strengthen safeguards against deceptive business practices and financial exploitation. Our objective is to promote legitimate business activities and protect the public, including from unlawful schemes operating through digital platforms.\u201d After consulting with business associations, professional associations, and other pertinent parties, the regulations were finalized.<\/p>\n When presented with schemes that promise exceptionally high or guaranteed returns, especially those that give incentives for recruiting new members, SECP encourages the public to proceed with caution and to confirm the validity of businesses before making an investment.<\/p>\n<\/div>\n