SECP bans Ponzi and pyramid schemes: 10 red flags under new 2026 rules

The Securities and Exchange Commission of Pakistan (SECP) has notified new rules that, for the first time, spell out in law what a Ponzi scheme, a pyramid scheme and a deceptive multi-level marketing (MLM) plan look like, and ban companies from running or promoting them. The Companies (Prohibition of Unlawful Activities) Regulations, 2026 were notified on Tuesday, 3 November.

For ordinary people, the useful part is the list of warning signs. If an “investment” or “business opportunity” on WhatsApp, TikTok or Facebook ticks these boxes, it is now illegal under SECP rules.

The red flags the SECP lists

1. Most of the money comes from recruiting new members, not from selling real products.
2. Old members are paid with new members’ money.
3. Guaranteed or unrealistic returns are promised.
4. A high joining fee is charged.
5. You are forced to buy stock or inventory.
6. The company hides how your money is used.
7. The product has little or no real demand and exists mainly to justify the scheme.
8. Misleading claims about income or the product.
9. No fair refund or buy-back if you want out.
10. The goods are unregistered, unapproved or illegal.

The rules also catch pyramid plans with unclear contracts, unreasonable purchase targets or “multiple positions” that pay you for stacking up recruits.

Who it covers

All companies, local and foreign, whether they work through offices or through websites, apps and social media. Schemes already running are covered too, and the ban extends to anyone who promotes or helps them.

What is still legal

Genuine direct selling stays allowed, where people earn mainly from selling products to real customers, not from signing up others.

Penalties

Companies, their directors and officers can be fined under section 512(2) of the Companies Act, 2017, and the SECP can move to wind up a company under section 301.

“Our objective is to promote legitimate business activities and protect the public, including from unlawful schemes operating through digital platforms,” SECP Chairman Dr Kabir Ahmed Sidhu said.

Why it matters now

The SECP put a draft out for consultation in February, saying Pakistan had no clear legal definitions for these schemes. That gap made it harder to act against apps and “earning” groups that promise daily profits for recruiting friends and relatives, the kind that leave thousands of savers out of pocket when they collapse.

Before you invest

The SECP’s advice is simple: be wary of anything promising unusually high or guaranteed returns, especially if it rewards recruitment, and check that a company is genuine before handing over money. You can look up whether a company is registered on the SECP website.

This is information, not investment advice.