The Securities and Exchange Commission of Pakistan (SECP) has formally banned Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM) and unlawful referral marketing across the country. The regulator notified the Companies (Prohibition of Unlawful Activities) Regulations, 2026 on Tuesday, 3 November 2026 — giving investors and the public a clear legal shield against financial exploitation.
The move targets schemes that promise extraordinary profits with little effort — the “invest two lakh, earn fifty thousand every month” offers that have emptied countless savings in Pakistan. From now on, running, promoting or recruiting for such schemes is against the law.
What the new regulations ban
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The regulations lay down clear definitions of the schemes that are now prohibited. A Ponzi scheme is one that pays returns to earlier investors using money collected from new investors — not profits from any real commercial, trading or business activity. Promising high, fixed or guaranteed returns with little or no identifiable risk is banned, as is concealing or misrepresenting how investor funds are actually used.
Pyramid schemes — where participants earn mainly by recruiting new members instead of selling genuine products — are prohibited outright, along with referral-marketing schemes that pay commissions primarily for adding new participants and show pyramid or Ponzi characteristics. The rules apply to all companies, including foreign companies, and cover schemes run through websites, mobile applications and social media platforms as well as physical channels.
Why the ban matters now
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Fraudulent investment schemes have grown rapidly in Pakistan alongside social media, with WhatsApp groups, apps and “investment packages” promising impossible returns to people with no financial background. SECP had published draft regulations back in December 2025 and invited public objections within fourteen days — the Tuesday notification turns that draft into enforceable law.
The timing matters because these schemes typically surge during economic stress, when households are desperate for extra income. A clear legal definition means victims — and police, banks and prosecutors — no longer have to argue about whether a scheme was “just marketing.”
Penalties and enforcement
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Violations can attract penalties against companies, directors and officers under Section 512(2) of the Companies Act, 2017, and enforcement action including winding up under Section 301. The regulations also extend to existing schemes that exhibit the characteristics of unlawful activities, so operators already running such schemes are not spared.
SECP Chairman Dr Kabir Ahmed Sidhu said the regulations “strengthen safeguards against deceptive business practices and financial exploitation” while promoting legitimate commercial activity.
What stays legal — and how to spot a scam
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Genuine direct selling remains perfectly legal: businesses that earn mainly by selling real products to end consumers are not affected by the ban. The line is crossed when the money comes from recruitment rather than sales — unclear contract terms, excessive joining fees, forced inventory purchases, or multiple participation positions designed to generate referral rewards are all prohibited.
To stay safe, treat any “investment” offer as a scam if it promises guaranteed high returns, pays you for bringing in new members, or cannot explain the real business behind the profits. Similar caution applies to unregulated trading schemes — read our guide to legal forex trading in Pakistan — and note that Pakistan’s new crypto regulator, PVARA, now holds bank-level anti-money-laundering powers over virtual assets too. If you have been approached with a suspicious scheme, the safest step is to walk away and report it.
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