Statute Details
- Title: Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order
- Act Code: MLMPSPA1973-OR1
- Legislative Type: Subsidiary legislation (Order)
- Authorising Act: Multi-Level Marketing and Pyramid Selling (Prohibition) Act (Cap. 190), in particular section 2(2)
- Current Status: Current version as at 27 Mar 2026
- Key Provisions (from extract): Section 1 (Citation); Section 2 (Excluded schemes and arrangements)
- Commencement: The extract indicates historical commencement dates (e.g., 1 Jun 2000; later amendments effective 1 Jan 2002, 1 Jul 2002, 1 Oct 2002)
- Related Legislation (as referenced): Financial Advisers Act 2001; Insurance Act; Securities and Futures Act 2001; Multi-Level Marketing and Pyramid Selling (Prohibition) Act
What Is This Legislation About?
The Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order (“the Order”) is a regulatory instrument made under Singapore’s Multi-Level Marketing and Pyramid Selling (Prohibition) Act (Cap. 190). In plain terms, the Act prohibits pyramid selling schemes, but it recognises that not every multi-level or network-based commercial arrangement is inherently abusive. The Order therefore identifies certain categories of schemes and arrangements that are treated as excluded from the Act’s definition of a “pyramid selling scheme or arrangement”.
The practical effect is that businesses and promoters who operate within the specified categories can structure their activities without falling foul of the prohibition—provided they strictly satisfy the conditions set out in the Order. The Order is particularly important for industries where multi-tier distribution models are common (for example, franchising, and regulated financial or insurance services), because it clarifies when such models are legally permissible.
Although the extract provided focuses on section 2, the Order’s role is best understood as a “carve-out” mechanism: it narrows the scope of what counts as a pyramid selling scheme by excluding certain schemes and arrangements from the statutory definition, but only where the statutory conditions are met.
What Are the Key Provisions?
1. Citation (Section 1)
Section 1 provides the short title: the Order may be cited as the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order. While this is standard drafting, it signals that the operative content is in section 2.
2. Excluded schemes and arrangements (Section 2)
Section 2(1) is the core provision. It states that the definition of “pyramid selling scheme or arrangement” in section 2 of the Act shall be taken not to include certain schemes or arrangements. In other words, these schemes are legally treated as outside the prohibited category—subject to the conditions in the Order.
(a) Regulated financial advisory and insurance arrangements (Section 2(1)(a))
The Order excludes any scheme or arrangement comprising the provision of any financial advisory service or insurance business (or any class of such schemes), so long as every person participating in the scheme is registered, licensed, approved, or otherwise entitled to act under the Financial Advisers Act 2001 or the Insurance Act (as applicable). This is a regulatory “gatekeeping” exclusion: if participants are properly authorised under the relevant financial services regime, the arrangement is not treated as a pyramid selling scheme for the purposes of the Act.
Practical takeaway: For compliance, promoters should verify not only the business model but also the regulatory status of every participant who is “participating in the scheme or arrangement”. A failure to ensure authorisation could undermine the exclusion and expose the arrangement to prohibition risk.
(b) Master franchise schemes (Section 2(1)(b))
The Order also excludes any master franchise scheme or arrangement (or class of such schemes) where a person is given the right to sub-franchise a franchise. However, this exclusion is conditional: it applies only if the scheme satisfies the terms and conditions in section 2(1)(c)(ii), (iii), (iv) and (vi). Notably, the cross-referenced conditions focus on (i) how benefits are earned (not through recruitment), (ii) restrictions on representations, and (iii) prohibitions on misleading conduct and certain promotional practices.
Practical takeaway: Even where a model is framed as franchising, the exclusion is not automatic. The promoter must ensure that the relevant benefit and conduct requirements are met, particularly those that prevent recruitment-based incentives and misleading claims.
(c) Schemes meeting a strict “safe harbour” test (Section 2(1)(c))
The most detailed exclusion is in section 2(1)(c). It excludes any scheme or arrangement (or class of such schemes) that satisfies all of the listed terms and conditions (i) to (viii). This is effectively a safe harbour for certain multi-level or networked arrangements, but it is tightly drafted.
Condition (i): No participation purchase requirement (other than demonstration materials)
A person must not be required to provide any benefit or acquire any commodity to participate, other than purchasing sales demonstration equipment or materials at a price not exceeding their cost. These items must not be for resale, and no commission, bonus, or other advantage may be given to any person in connection with that purchase.
Condition (ii): Benefits must arise from commodity distribution or participant performance, not recruitment
The Order provides that benefits received by promoters or participants must accrue as a result of the sale, lease, licence, or other distribution of a commodity to another person, or as a result of the performance of one or more participants in relation to such distribution. This is designed to ensure that the economic engine is genuine product/service distribution rather than recruitment.
Condition (iii): No benefits from introduction or recruitment
Subject to condition (ii), no benefit may be received by any person as a result of introducing or recruiting others to become participants.
Condition (iv): No misrepresentation about how benefits accrue
Promoters must not make, or cause to be made, any representation to any person that benefits will accrue in a manner other than as specified in condition (ii). This is a direct prohibition on “recruitment pays” marketing claims.
Condition (v): Record-keeping and audited benefit statistics
For representations relating to actual or potential benefit accrual, promoters must maintain fair and accurate records of the maximum, minimum, median, average, and mode benefits that have accrued to promoters and participants. These records must be duly audited by an auditor for each financial year.
Condition (vi): Anti-misleading and anti-fraud conduct—plus participant safeguards
Promoters must not, and must take reasonable steps to ensure participants do not, knowingly: (A) make false or misleading representations; (B) omit material particulars; (C) engage in misleading conduct likely to mislead about material particulars; or (D) use fraud, coercion, harassment, or unconscionable or unlawful means in promoting the scheme or the commodity.
Condition (vii): Full refund or buy-back guarantee (with minimum period)
The commodity must be distributed with a full refund or buy-back guarantee exercisable by every participant on reasonable commercial terms and within a period of at least 60 days from the date of distribution to the participant.
Condition (viii): Written notice of the guarantee at the time of distribution
Every participant must be informed in writing, at the time of distribution of the commodity, of the existence of the guarantee and how it can be exercised.
3. Definitions and interpretive provisions
Section 2(2) provides that, for the purposes of section 2(1)(b), “franchise” has the same meaning as in section 2(1) of the Securities and Futures Act 2001 (Act 42 of 2001). This matters because “franchise” is a defined term and the scope of what counts as a franchise under the SFA will control whether the master franchise exclusion is available.
Section 2(3) defines “cost” for sales demonstration equipment or materials as the direct cost of production or the wholesale price. It also defines “representation” to include a statement or claim. These definitions broaden the compliance obligations: promoters must treat marketing statements, claims, and implied assertions as “representations” for the purposes of conditions (iv) and (v).
How Is This Legislation Structured?
The Order is concise and structured around two operative elements:
Section 1 sets out the citation (short title).
Section 2 contains the substantive exclusions. Section 2(1) lists categories of schemes and arrangements that are excluded from the Act’s definition of a pyramid selling scheme or arrangement. Section 2(2) and Section 2(3) provide interpretive definitions that support the application of the exclusions—particularly for franchising and for the “cost” and “representation” concepts used in the safe harbour conditions.
Who Does This Legislation Apply To?
The Order applies to “schemes or arrangements” that might otherwise fall within the Act’s definition of a pyramid selling scheme or arrangement. In practice, this means it affects promoters, organisers, and participants in multi-level marketing, network distribution, and franchising-like models.
For the regulated financial advisory and insurance exclusion (section 2(1)(a)), the Order focuses on the regulatory status of every person participating. For the safe harbour exclusion (section 2(1)(c)), it focuses on the scheme’s design and the promoter’s conduct: what participants must pay for (if anything), how benefits are earned, what representations are made, whether audited benefit records are maintained, and whether refund/buy-back protections are provided and properly disclosed.
Why Is This Legislation Important?
This Order is significant because it provides the legal “boundary” between prohibited pyramid selling and permissible multi-level or network-based arrangements. For practitioners, the key value is that it offers a structured set of conditions that can be used to assess risk and to design compliant programs.
From an enforcement and compliance perspective, the Order is also a reminder that exclusions are conditional. A promoter cannot assume that calling a model “multi-level marketing” or “franchising” automatically avoids prohibition. Instead, the promoter must demonstrate compliance with the specific requirements—especially those designed to prevent recruitment-based remuneration and misleading benefit claims.
Practically, the most litigated or scrutinised aspects of such schemes tend to be: (i) whether participants are required to buy in to participate; (ii) whether benefits are tied to recruitment rather than genuine sales/distribution; (iii) whether promotional materials contain misleading representations; (iv) whether benefit statistics are properly recorded and audited; and (v) whether refund/buy-back protections are real, accessible, and disclosed at the point of distribution. This Order addresses each of these points directly, making it a critical reference for legal review, regulatory submissions, and dispute analysis.
Related Legislation
- Multi-Level Marketing and Pyramid Selling (Prohibition) Act (Cap. 190)
- Financial Advisers Act 2001 (Act 43 of 2001)
- Insurance Act (Cap. 142)
- Securities and Futures Act 2001 (Act 42 of 2001) (definition of “franchise”)
Source Documents
This article provides an overview of the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.