SECP Moves to Ban Multi-Level Marketing, Pyramid and Ponzi Schemes Across Pakistan
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The SECP has issued S.R.O. 2440(I)/2025 to introduce the draft Companies (Multi-Level Marketing, Referral Marketing, Pyramid & Ponzi Schemes) Regulations, 2025.
The SECP has warned that any company found to be engaged in any unlawful activity prohibited under these regulations shall be liable to be wound up.
No company shall promote or carry on any scheme or business in which income or benefits are derived primarily from the recruitment of new members rather than the genuine sale of goods to end consumers; where there is little or no evidence of bona fide product sales to ultimate users; or where products are merely incidental or absent altogether.
No company shall promote or carry on any scheme or business where: There is no clear, accessible, and equitable policy for the repurchase, refund, or return of unsold products; and/or products sold are unregistered, unapproved, or constitute illegal imports or smuggled goods.
This shall not restrict bona fide direct selling activities where compensation is primarily derived from actual product sales to end consumers.
Prohibition of Ponzi Schemes
No company shall promote or carry on any scheme or business that:
Pays returns to earlier investors from funds contributed by new investors, rather than profits from commercial, trading, or business activity;
Offers high, fixed, or guaranteed returns with little or no identifiable risk;
Has no identifiable underlying business, asset, or revenue-generating activity; and/or
Conceals, misrepresents, or withholds information regarding the use or deployment of investor funds.
Prohibition of Pyramid Schemes
No company shall promote or carry on any scheme or business that:
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Rewards participants primarily for enrolling or recruiting others rather than for the sale of genuine products;
Lacks a clear written agreement or clear contractual terms governing participants’ rights and obligations;
Requires excessive or unreasonable product purchases as a condition for joining or continuing participation;
Fails to provide fair, transparent, or timely refund policies or lacks any buyback arrangements; or
Allows or encourages multiple participation positions for the purpose of generating additional recruitment-based rewards.
Referral Marketing
No company shall promote or carry on any scheme or business that:
Offers, promises, or provides commissions, rewards, or benefits primarily for referring new participants; and
Exhibits any characteristic of a pyramid or Ponzi scheme.
To promote responsible business conduct and protect consumers and participants, companies shall ensure strict compliance with these regulations while designing, operating, or promoting any scheme.
The general public is encouraged to report any unlawful activity prohibited under these regulations, the SECP added.
Content retrieved from: https://propakistani.pk/2025/12/18/secp-moves-to-ban-multi-level-marketing-pyramid-and-ponzi-schemes-across-pakistan/.
