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 (Chapter 190, Section 2(2))
- Current Version Status: Current version as at 27 Mar 2026
- Key Provision (Extracted): Section 2 — excludes certain schemes/arrangements from the statutory definition of “pyramid selling scheme or arrangement”
- Commencement: Not stated in the extract; legislative history indicates key amendments effective on specified dates
- Relevant Cross-References: Financial Advisers Act 2001; Insurance Act (Cap. 142); Securities and Futures Act 2001; Multi-Level Marketing and Pyramid Selling (Prohibition) Act
- Notable Amendments (from legislative history): S 617/2001; S 338/2002; S 525/2002; SL 248/2000
What Is This Legislation About?
The Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order (“the Order”) is a Singapore legal instrument made under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act (the “Prohibition Act”). In plain terms, it addresses a practical problem: not every multi-level marketing (“MLM”) or recruitment-based business model is automatically illegal. Some structures can be legitimate—particularly where participants are not required to pay to join, where benefits are tied to genuine sales or performance, and where consumer protections exist.
This Order therefore does not “legalise MLM” generally. Instead, it carves out specific categories of schemes and arrangements that are excluded from the Act’s definition of a “pyramid selling scheme or arrangement”. The effect is that, for those excluded categories, the prohibition framework in the Prohibition Act should not apply because the scheme falls outside the statutory definition.
For practitioners, the Order is best understood as a compliance and risk-mapping tool. It sets out detailed conditions that must be met for a scheme to qualify for exclusion. If the conditions are not met—especially around recruitment incentives, misrepresentations, and buy-back/refund rights—the scheme may be treated as a prohibited pyramid selling scheme under the parent Act.
What Are the Key Provisions?
1. Section 1: Citation
Section 1 simply provides the short title: the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order. This is standard drafting and does not create substantive obligations.
2. Section 2(1): Excluded schemes and arrangements
The core of the Order is Section 2, which states that the definition of “pyramid selling scheme or arrangement” in Section 2 of the Prohibition Act is to be taken not to include certain schemes or arrangements. In other words, if a scheme fits within one of the listed categories and satisfies the relevant conditions, it is excluded from the prohibited definition.
(a) Regulated financial advisory and insurance schemes
Section 2(1)(a) excludes any scheme or arrangement that comprises the provision of a financial advisory service and/or insurance business (or any class of such schemes), provided that every person participating in the scheme is registered, licensed, approved, or otherwise entitled to act under the relevant regulatory regimes: the Financial Advisers Act 2001 for financial advisory services, or the Insurance Act for insurance business.
Practical significance: This exclusion is not about the commercial mechanics of recruitment; it is about regulatory status. If participants are properly authorised under the relevant financial/insurance laws, the scheme is treated as outside the pyramid selling definition. Lawyers should therefore focus on verifying licensing/registration status for all participants who “participate” in the scheme, not merely the promoter.
(b) Master franchise schemes (sub-franchising rights)
Section 2(1)(b) 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: the scheme must satisfy the terms and conditions in Section 2(1)(c)(ii), (iii), (iv) and (vi).
Key conditions imported by reference:
- Recruitment must not generate benefits: Section 2(1)(c)(iii) prohibits benefits being received as a result of introducing or recruiting participants.
- No misleading benefit representations: Section 2(1)(c)(iv) prohibits promoters from representing that benefits will accrue in a manner other than specified.
- Record-keeping for benefit representations: Section 2(1)(c)(v) requires fair and accurate records of maximum/minimum/median/average/mode benefits, audited each financial year, in respect of representations relating to actual or potential benefit accrual.
- Anti-misrepresentation and anti-fraud obligations: Section 2(1)(c)(vi) prohibits false/misleading representations, material omissions, misleading conduct, and use of fraud/coercion/harassment/unconscionable or unlawful means.
Practitioner note: The cross-reference structure means that franchise arrangements are not automatically excluded. The scheme must be assessed against the imported conditions, even if it otherwise resembles a legitimate franchising model.
(c) General exclusion category: schemes satisfying detailed consumer and incentive safeguards
Section 2(1)(c) provides a broader exclusion for schemes/arrangements that satisfy eight specific conditions (i) to (viii). This is the most litigated and compliance-heavy part of the Order because it directly addresses the hallmarks of pyramid selling: entry payments, recruitment incentives, misleading claims, and lack of exit rights.
(i) No required benefit or commodity purchase to participate (except limited 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 cost. Those items must not be for resale, and no commission/bonus/advantage may be given to any person in relation to that purchase.
(ii) Benefits must arise from commodity distribution/performance, not recruitment
Benefits received must be tied to the sale/lease/licence/distribution of a commodity to other persons or to performance by participants in relation to such distribution. The provision distinguishes between benefits accruing to promoters/participants from actual commodity transactions with third parties.
(iii) No benefits from introduction or recruitment
Subject to (ii), no benefit may be received by any person as a result of introducing or recruiting others to participate.
(iv) No misrepresentation about how benefits accrue
Promoters must not make (or cause to be made) representations that benefits will accrue in any manner other than that specified in (ii).
(v) Mandatory audited records for benefit representations
Where representations relate to actual or potential benefit accrual, promoters must maintain fair and accurate records of maximum, minimum, median, average and mode benefits that have accrued to the promoter and participants, audited by an auditor for each financial year.
(vi) Anti-misleading and anti-abusive conduct restrictions
Promoters must not, and must take reasonable steps to ensure participants do not, knowingly:
- make or cause to be made false or misleading representations;
- omit material particulars;
- engage in conduct misleading or likely to mislead about material particulars; or
- use fraud, coercion, harassment, or unconscionable or unlawful means in promoting the scheme or commodity.
(vii) Full refund or buy-back guarantee with minimum 60-day exercise period
The commodity must be distributed with a full refund or buy-back guarantee exercisable by every participant on reasonable commercial terms and within at least 60 days from distribution.
(viii) Written notice of the guarantee at the time of distribution
Every participant must be informed in writing, at the time the commodity is distributed, of the existence of the guarantee and how it can be exercised.
3. Section 2(2): Definition of “franchise” for master franchise exclusion
For Section 2(1)(b), “franchise” has the same meaning as in Section 2(1) of the Securities and Futures Act 2001. This matters because the franchising concept in Singapore is defined by securities/regulatory policy, not simply by commercial branding.
4. Section 2(3): Definitions of “cost” and “representation”
For Section 2(1)(c):
- “Cost” means direct cost of production or wholesale price of sales demonstration equipment/materials.
- “Representation” includes any statement or claim.
These definitions broaden the scope of what counts as a representation and tighten the pricing basis for the limited “demonstration materials” exception.
How Is This Legislation Structured?
The Order is short and structured around a single operative provision. It contains:
Section 1 (Citation) and Section 2 (Excluded schemes and arrangements). Section 2 is subdivided into:
- Section 2(1) — the substantive exclusions, with categories in paragraphs (a), (b), and (c);
- Section 2(2) — definitional cross-reference for “franchise”; and
- Section 2(3) — definitions of “cost” and “representation”.
In practice, lawyers typically treat Section 2(1)(c) as the “test” for whether a scheme qualifies for exclusion, because it contains the detailed conditions that mirror pyramid selling risks.
Who Does This Legislation Apply To?
The Order applies to “schemes or arrangements” that could fall within the Prohibition Act’s definition of a “pyramid selling scheme or arrangement”. While the Order itself does not impose direct licensing requirements, it determines whether a scheme is excluded from the prohibited definition—thereby affecting whether the prohibition regime may be triggered.
Accordingly, it is relevant to promoters, organisers, master franchise operators, and participants in multi-level marketing structures. It is also relevant to regulated financial advisers and insurance participants because Section 2(1)(a) ties exclusion to authorisation under the Financial Advisers Act 2001 and the Insurance Act.
Why Is This Legislation Important?
This Order is important because it provides the legal boundary between prohibited pyramid selling and potentially legitimate multi-level marketing or franchise-like arrangements. The conditions in Section 2(1)(c) are designed to ensure that participants are not paying to join for the primary purpose of earning recruitment-based returns. Instead, benefits must be linked to real commercial activity—specifically, the sale/lease/licence/distribution of a commodity to other persons or performance connected to such distribution.
From an enforcement and litigation perspective, the most consequential provisions are those that address (i) recruitment incentives (Sections 2(1)(c)(ii) and (iii)), (ii) misrepresentation and record-keeping (Sections 2(1)(c)(iv) and (v) and the anti-misleading conduct in (vi)), and (iii) exit/consumer protection (Sections 2(1)(c)(vii) and (viii)). These are the areas where evidence typically arises: marketing materials, scripts, compensation plans, participant communications, and refund/buy-back processes.
For practitioners advising businesses, the Order functions as a compliance checklist. A scheme that fails to provide the required buy-back guarantee, or that allows benefits to be earned from recruitment, or that makes benefit claims without audited records, risks losing the exclusion and becoming exposed to the prohibition framework under the parent Act.
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.