Referral and Affiliate Programme Rules in Singapore: Staying the Right Side of the Pyramid Selling Act

Last updated 7 September 2026 — by Adrian Tan, SDM. Marketing guidance, not legal advice. Whether a particular scheme falls inside the Act is fact-specific; take your own legal advice before launching one.

Almost every Singapore e-commerce brand, app and subscription business runs a referral programme. Give a friend $10, get $10. Share your code, earn store credit. Recruit brand ambassadors, pay them a cut. It is one of the cheapest acquisition channels there is, and it is usually designed by a growth marketer in an afternoon.

What almost nobody in that chair knows is that Singapore has a statute that makes certain reward structures a criminal offence carrying a fine of up to $200,000, imprisonment of up to five years, personal liability for every director, and a separate court order to hand back everything you earned from it. The Multi-Level Marketing and Pyramid Selling (Prohibition) Act 1973 is short, old and almost never discussed in marketing circles — and the line it draws runs directly through modern referral and affiliate design.

The good news is that an ordinary two-party referral programme is almost certainly fine. The bad news is that three specific design choices — paying for sign-ups rather than sales, adding a second tier, and charging people to join — move you towards the wrong side of it, and each one is a decision a growth team makes routinely without a legal review.

The offence, and how wide it is

Section 3(1) of the Act provides that it is unlawful for any person “to promote or participate in a multi-level marketing scheme or arrangement or a pyramid selling scheme or arrangement or to hold out that the person is promoting or participating in such a scheme.”

That last limb deserves a marketer’s full attention. You do not need to be running a prohibited scheme to commit the offence. Holding yourself out as running one is enough — which means the copy itself can be the problem. Landing-page language borrowed from overseas MLM playbooks (“build your downline”, “earn from your team’s sales”, “unlimited passive income from recruiting”) describes a prohibited scheme, and describing it is within section 3(1) whether or not the mechanics behind it match.

Section 3(2) sets the penalty: on conviction, a fine not exceeding $200,000 or imprisonment for a term not exceeding 5 years, or both.

Three further provisions widen the exposure considerably:

• Section 6(1) — where the offender is a company, every individual who was a director, general manager, manager, secretary or other officer concerned in the management of the company, or purporting to act as one, is deemed guilty alongside the company. Section 6(2) gives a defence only where the individual proves the offence was committed without their consent or connivance and that they exercised the diligence they ought to have. “Marketing owned it” is not that defence.
• Section 7(1) — on a conviction under section 3(2), where the person received a benefit and its value can be assessed, the court is to order payment, in addition to any other punishment, of a sum up to the value of the benefit received, recoverable as a fine. In plain terms, disgorgement on top of the penalty.
• Sections 4 and 5 — you may not register a business name, or incorporate or register a company, for a business designed to promote such a scheme, on the same $200,000 / 5-year penalty.

The three-limb test that decides everything

Everything turns on the definition in section 2(1). A “pyramid selling scheme or arrangement” — and the Act expressly gives “multi-level marketing scheme or arrangement” the same meaning — means any scheme or arrangement for the distribution or purported distribution of a commodity by which:

1. (a) a person may in any manner acquire a commodity, or a right or licence to acquire the commodity, for sale, lease, licence or other distribution;
2. (b) that person receives any benefit, directly or indirectly, as a result of either (i) the recruitment, acquisition, action or performance of one or more additional participants in the scheme, or (ii) the sale, lease, licence or other distribution of the commodity by one or more additional participants; and
3. (c) any benefit is or may be received by any other person who promotes or participates in the scheme — other than the person in (a) or an additional participant in (b).

Read the connective carefully: limbs (a), (b) and (c) are cumulative. A scheme is only a pyramid selling scheme if all three are present. And limb (c) is the one that saves ordinary referral marketing, because it requires a benefit to flow to a third party in the chain — someone who is neither the acquirer nor the additional participant they brought in.

So a plain refer-a-friend programme — your customer refers, the friend buys, your customer gets a reward, nobody else in a chain is paid — does not satisfy limb (c) and is therefore not a pyramid selling scheme at all. It does not need an exemption, because it never met the definition.

Add one tier — a brand ambassador who earns an override on what the affiliates they recruited go on to sell — and all three limbs are satisfied. At that point the arrangement is inside the Act’s definition, and the only way it is lawful is if it fits the Excluded Schemes Order.

Two definitions that catch people out

“Benefit” is defined in section 2(1) as including “any gratuity, commission, cross commission, bonus, refund, discount, dividend and any other payment, service or advantage of whatever description.” Two carve-outs only: the purchase of a sample of a commodity at a price not exceeding its cost and not for resale, and time and effort spent pursuing sales, distribution or recruiting.

That definition is deliberately total. Store credit is a benefit. A discount code is a benefit. A free month of a subscription is a benefit. Early access, a service, an “advantage of whatever description” — all benefits. Growth teams often assume that because no cash moves, the arrangement is outside anything that regulates payment. It is not; the Act defines its way around that assumption.

“Commodity” is equally broad: “any goods, service, right or other property, whether tangible or intangible, capable of being the subject of a sale, lease or licence.” A SaaS subscription, a course, a digital download, an app licence — all commodities. There is no “we sell software, not products” exit. And “promote” includes to manage, form, operate, carry on, engage in “or otherwise to organise”, so the agency that builds and runs the programme is promoting it too.

The eight-condition safe harbour

Section 2(2) lets the Minister prescribe excluded schemes, and the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order does exactly that. Paragraph 2(1) excludes three things from the definition: financial advisory services and insurance business, so long as every participant is properly registered, licensed or approved under the Financial Advisers Act 2001 or the Insurance Act; master franchise arrangements, subject to some of the conditions below; and — the one that matters here — any scheme satisfying all eight conditions in paragraph 2(1)(c).

Note what the master-franchise exclusion in paragraph 2(1)(b) does not require: it is subject only to conditions (ii), (iii), (iv) and (vi) — so no pay-to-join bar, no audited earnings records, and no buy-back guarantee. A drafting curiosity worth knowing if franchising is your model: paragraph 2(2) borrows the meaning of “franchise” from section 2(1) of the Securities and Futures Act 2001.

The one design decision that matters most

Put conditions (ii) and (iii) side by side and you get the sharpest practical rule in this entire area of Singapore law.

Condition (ii) permits a benefit that accrues as a result of the sale, lease, licence or other distribution of a commodity to any other person. Condition (iii) then prohibits, subject to (ii), any benefit received “as a result of the introduction or recruitment of one or more persons to be participants in the scheme or arrangement.”

Translated into growth language: pay on purchase, not on sign-up.

Consider three common reward triggers, in ascending order of risk:

• “Get $10 when your friend makes their first purchase.” The benefit accrues from a distribution of a commodity to another person. This is the shape condition (ii) describes.
• “Get $10 when your friend creates an account.” The benefit accrues from an introduction, with no distribution behind it. If the scheme ever needs the Order — that is, if it has a third paid tier — this design cannot use paragraph 2(1)(c) at all, because condition (iii) is not met.
• “Get $10 for every ambassador you recruit, plus a share of theirs.” All three limbs of the definition, and the safe harbour closed by condition (iii). This is the structure the Act exists to prohibit.

Because a plain two-party programme never meets limb (c) of the definition, a sign-up trigger in a single-tier programme is not, by itself, an offence. But the moment anyone proposes adding a tier — and someone always does, because tiered ambassador programmes look like free growth — a sign-up trigger becomes the thing that makes the safe harbour unavailable. Designing to condition (iii) from day one costs nothing and keeps the tiering option open. It also, incidentally, produces a better programme: rewarding purchases rather than registrations is how you avoid paying for fake accounts, which is the most common way referral budgets are wasted. Our guide to e-commerce conversion rate optimisation in Singapore covers the measurement side of getting that trigger right.

Earnings claims: the audit obligation nobody budgets for

Condition (v) deserves separate treatment because it is the condition most likely to be breached by a programme that is otherwise well designed.

It applies “in respect of any representation relating to the actual or potential accrual of any benefit” — and paragraph 2(3) defines “representation” to include “a statement or claim”. So any earnings claim at all triggers it: a figure on a recruitment landing page, a testimonial video, a screenshot in an ambassador deck, a line in a paid social ad. Once triggered, the promoter must keep fair and accurate records of the maximum, minimum, median, average and mode benefits accruing to the promoter and to participants, audited by an auditor for each financial year.

Five statistical measures, audited annually, is a real finance workload. Most Singapore brands running ambassador programmes publish earnings claims and have none of it. The pragmatic choice for a growth team is usually the obvious one: do not make earnings claims. Describe the reward structure factually — what the commission is, on what, when it pays — and leave outcome figures out entirely. That also keeps you clear of condition (vi) and of the general misrepresentation risk under the Consumer Protection (Fair Trading) Act.

Condition (vi) is the other one worth building for. It requires the promoter to take reasonable steps to ensure participants do not make false or misleading representations, omit material particulars, or use coercion, harassment or unconscionable means in promoting the scheme or the commodity. That is an active supervision duty over your affiliates and ambassadors — and it sits alongside the disclosure expectations we cover in our guide to influencer and KOL marketing in Singapore. In practice: a written content policy, a prohibited-claims list, spot monitoring, and a documented process for removing a participant who breaches it.

A compliant referral programme, in seven decisions

1. Count the tiers. One tier — referrer and referred — and limb (c) of the definition is not met. Two or more paid levels and you are inside the Act and must satisfy every one of the eight conditions.
2. Trigger the reward on a purchase, never a sign-up. Condition (iii) makes this the difference between a scheme that can use the safe harbour and one that cannot.
3. Charge nothing to join, and make no purchase a condition of participating. Demonstration materials only, at cost, not for resale, with no commission attached.
4. Make no earnings claims unless you are prepared to keep and annually audit maximum, minimum, median, average and mode benefit records.
5. Write the reward structure into the copy exactly as it works — condition (iv) prohibits representing that benefits accrue in any other way, and section 3(1) makes merely holding out a prohibited structure an offence.
6. Police your participants. A content policy, a prohibited-claims list, monitoring and removal. Condition (vi) requires reasonable steps, and reasonable steps have to be evidenced.
7. If you are inside the Act, build the 60-day buy-back and the written notice at distribution into the operational flow, not the terms page.

None of this makes referral marketing harder to run. A single-tier, purchase-triggered programme with a factual reward description is both the simplest thing to build and the safest thing to own — and it is what most successful Singapore referral programmes already are. The risk enters when someone proposes to “scale it” by adding levels.

Frequently asked questions

Is a refer-a-friend programme legal in Singapore?

A plain two-party referral is generally outside the Act. The definition in section 2(1) requires all three of limbs (a), (b) and (c), and limb (c) needs a benefit to flow to a person other than the acquirer and the additional participant they brought in. A programme where your customer refers a friend, the friend buys and only your customer is rewarded does not meet limb (c), so it is not a pyramid selling scheme and needs no exemption. Classification is fact-specific, so take advice on anything unusual.

Can I pay someone for referrals that only sign up, not buy?

In a single-tier programme, a sign-up trigger is not itself an offence, because the arrangement does not meet the section 2(1) definition. But condition (iii) of the Excluded Schemes Order prohibits any benefit received as a result of the introduction or recruitment of participants. So if you ever add a second paid tier, a sign-up trigger closes the safe harbour. Design to a purchase trigger from the start.

Does store credit count, or only cash?

It counts. Section 2(1) defines “benefit” to include any gratuity, commission, cross commission, bonus, refund, discount, dividend “and any other payment, service or advantage of whatever description”. Store credit, discount codes, free subscription months and service perks are all benefits. The only carve-outs are a sample bought at not more than cost and not for resale, and time and effort spent on sales or recruiting.

Are multi-tier affiliate programmes ever allowed in Singapore?

Only if they satisfy all eight conditions in paragraph 2(1)(c) of the Excluded Schemes Order, or fall within the financial-advisory, insurance or master-franchise exclusions. The eight conditions include no pay-to-join, benefits flowing only from distribution, nothing paid for recruitment, no inconsistent representations, audited earnings records where claims are made, active supervision of participants, a 60-day buy-back guarantee, and written notice of that guarantee at the time of distribution.

What is the penalty for running a pyramid scheme in Singapore?

Section 3(2) provides for a fine not exceeding $200,000 or imprisonment for a term not exceeding 5 years, or both. Section 6(1) deems every director, general manager, manager, secretary or other officer concerned in the management of the company guilty as well, with a defence under section 6(2) only where they prove absence of consent or connivance plus due diligence. Section 7(1) adds a further order to pay a sum up to the value of the benefit received, recoverable as a fine.

Can our marketing copy alone create liability?

Yes. Section 3(1) makes it unlawful to promote or participate in such a scheme “or to hold out that the person is promoting or participating” in one. Copy that describes downlines, recruitment income or team overrides holds out a prohibited structure whether or not the mechanics match. And “promote” is defined to include managing, operating, carrying on or otherwise organising, so an agency running the programme is exposed alongside the brand.

The takeaway

Singapore’s rule on referral and affiliate design is narrower and sharper than most marketers assume. The Act does not ban paying people to bring you customers. It bans a specific shape: a chain in which someone above the referrer also gets paid. That is limb (c) of the section 2(1) definition, and it is why an ordinary two-party programme is fine and a tiered ambassador programme needs to clear eight separate conditions.

If you remember one line from this article, make it condition (iii): no benefit may be received as a result of the introduction or recruitment of a participant. Reward the purchase, not the sign-up. That single design choice keeps the safe harbour available if you ever tier the programme, keeps you clear of the structure the Act was written against, and stops you paying for accounts that never buy anything.

If you want a referral or affiliate programme designed around real purchase data rather than vanity sign-ups, that is the kind of work our performance marketing team in Singapore does — see our client case studies, including how we approached acquisition for Rooki Beauty. For the foundations, start with our complete guide to performance marketing in Singapore; for the adjacent compliance picture, see our guides to lucky draw and giveaway rules, email marketing and e-commerce digital marketing.