SECP bans Ponzi and pyramid schemes across websites, apps and social media
Pakistan's securities regulator has moved against the recruitment-based business model itself. The Securities and Exchange Commission of Pakistan has notified the Companies (Prohibition of Unlawful Activities) Regulations, 2026, barring Ponzi schemes, pyramid schemes, deceptive multi-level marketing and unlawful referral marketing across physical and digital platforms, including websites, mobile applications and social media.
The rules apply to all companies, foreign ones included, and target models where earnings come mainly from recruiting new participants rather than genuine product sales. The SECP lists the markers it will treat as unlawful: money from new investors used to pay earlier ones, promises of unrealistic or guaranteed returns, excessive joining fees, compulsory inventory purchases, and concealment of how investors' funds are used. 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 are also covered, as are pyramid structures with unclear contractual terms, unreasonable purchase requirements or multiple participation positions built to generate recruitment rewards.
Legitimate direct selling survives the crackdown. The SECP said businesses whose compensation comes primarily from actual sales to end consumers remain permissible. The regulations also reach existing schemes showing the characteristics of unlawful activity, whether they run through physical or digital channels, and companies are barred from promoting, conducting or facilitating them. Violations may draw penalties against companies, directors and officers under Section 512(2) of the Companies Act, 2017, and the regulator may pursue other enforcement action, including winding up companies under Section 301.
SECP Chairman Dr Kabir Ahmed Sidhu cast the rules as a shield for the public. "Our objective is to promote legitimate business activities and protect the public, including from unlawful schemes operating through digital platforms," he said, adding that the regulations would strengthen safeguards against deceptive business practices and financial exploitation. The rules were finalised after consultations with professional bodies, business organisations and other stakeholders.
The regulator urged the public to be wary of schemes promising unusually high or guaranteed returns, especially those offering rewards for recruiting new participants, and to verify a company's legitimacy before committing funds.
