{
  "id": 17974699,
  "title": "SECP notifies regulations to prohibit Ponzi, pyramid schemes",
  "url": "https://urgent.news/2026/11/03/secp-notifies-regulations-to-prohibit-ponzi-pyramid-schemes",
  "topic": "business",
  "section": "Business",
  "published": "2026-11-03T14:01:52.000Z",
  "source": {
    "name": "Business Recorder",
    "slug": "business-recorder",
    "url": "https://www.brecorder.com/news/40447228/secp-notifies-regulations-to-prohibit-ponzi-pyramid-schemes"
  },
  "original_language": "en",
  "account": "The Securities and Exchange Commission of Pakistan (SECP) has unveiled new regulations aimed at curbing Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM) and unlawful referral marketing. These rules, set out in the Companies (Prohibition of Unlawful Activities) Regulations, 2026, seek to tighten controls over financial fraud and misleading business practices across both physical and digital platforms.\n\nThe regulations apply to all companies, including foreign entities, and prohibit business models where earnings come mainly from recruiting new participants rather than genuine product sales. They also target practices involving funds collected from new investors to pay earlier participants, promises of unrealistic returns, excessive joining fees, mandatory inventory purchases, and hiding how investor funds are used.\n\nFurther prohibited are schemes involving products with little real market demand, misleading claims about income or products, inadequate refunds or buy-back arrangements, and the sale of unregistered, unapproved or illegal goods. Pyramid schemes with unclear contracts, unreasonable purchase conditions or multiple participation tiers designed to generate rewards through recruitment are also banned. However, SECP clarified that legitimate direct-selling businesses, where compensation primarily comes from sales to end consumers, are still allowed.\n\nThe regulations also cover existing schemes that exhibit characteristics of unlawful activities, regardless of whether they operate physically or digitally. Companies are barred from promoting, conducting or facilitating such activities. Violations may result in penalties under Section 512(2) of the Companies Act, 2017, and could lead to other enforcement actions like winding up companies under Section 301. SECP Chairman Dr Kabir Ahmed Sidhu said the regulations would bolster defenses against deceptive practices and financial exploitation, aiming to promote legitimate business while protecting the public. He stressed caution against schemes promising unusually high returns, particularly those rewarding recruitment. The SECP urged investors to verify the legitimacy of companies before investing.",
  "summary": "The Securities and Exchange Commission of Pakistan (SECP) has introduced new regulations to prohibit Ponzi schemes, pyramid schemes, deceptive multi-level marketing (MLM) and unlawful referral marketing, tightening safeguards against financial fraud and misleading business practices. The SECP has notified the Companies (Prohibition of Unlawful Activities) Regulations, 2026, establishing criteria…",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}