ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued new regulations that define and outlaw Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM), and unlawful referral marketing. The Companies (Prohibition of Unlawful Activities) Regulations, 2026, apply to all companies, including foreign entities, and address schemes operating through both physical and digital channels.

According to Securities and Exchange Commission of Pakistan, the regulations identify banned practices such as generating income primarily through recruitment rather than actual product sales, utilizing funds from new investors to pay previous investors, promising unrealistic or guaranteed returns, and imposing excessive joining fees or inventory purchases. The regulations also address schemes involving products with little market demand, misleading income or product claims, inadequate refund or buy-back arrangements, and the sale of unregistered, unapproved, or illegal goods.

The regulations extend to existing schemes with characteristics of unlawful activities, regardless of their operational medium, and prohibit companies from promoting or facilitating such activities. Violations could result in penalties against companies, directors, and officers, as well as enforcement actions, including winding up.

SECP Chairman Dr. Kabir Ahmed Sidhu stated that the regulations aim to bolster safeguards against deceptive business practices and financial exploitation. The public is advised to be cautious of schemes that promise unusually high or guaranteed returns, especially those offering rewards for recruiting new participants, and to verify company legitimacy before investing.