SECP imposes Rs962m penalties

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP), aided by its in-house Adjudication Division, aims to promote compliance and transparency in the corporate sector.

This quasi-judicial arm maintains independence and minimises arbitrariness in decision-making while adhering to laws and international best practices.

The commission effectively enforced its laws in the first half of 2023-24, deciding 1,849 cases of violations and imposing penalties of approximately Rs962 million for corrective measures.

From July to December 2023, the SECP primarily decided cases against companies alleged to violate Section 84 of the Companies Act 2017, which prohibits companies from inviting, accepting, or renewing public deposits.

A total of 11 orders were issued under Section 84, resulting in a penalty of Rs581.50m. Directors of such companies were also disqualified from holding office for five years under Section 172 of the Companies Act 2017.

The SECP also imposed a penalty of Rs1.75m through 11 orders against listed companies for violating Section 199 of the act, which only allows companies to invest in their associated companies or undertakings only through special resolution.

Another area of focus was digital lending. The adjudication division passed seven orders, imposing a penalty of Rs13.26m under Section 282 of the Companies Ordinance 1984, based on observations of various non-compliances with relevant laws.

Moreover, 21 orders were issued under SECP’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Regulations 2020 for alleged contraventions of mandatory AML/CFT regulations, including deficiencies in know-your-customer (KYC)/ customer due diligence (CDD) processes, customer identity verification, risk categorisation, unapproved AML policy documents, and Targeted Financial Sanctions obligations. The total penalty imposed was Rs14.66m.

Five orders were issued for non-disclosure of substantial acquisition in voting shares of listed companies, and a penalty of Rs1.2m was imposed under the Securities Act 2015 for contraventions. Furthermore, a fine of Rs500,000 was levied for failing to disclose price-sensitive information in compliance with Section 96 of the Securities Act 2015.

At the same time, 45 orders were issued for filing substantial shareholding and directorship changes in listed companies under the Reporting and Disclosure (of Shareholding by Directors, Executive Officers and Substantial Shareholders in Listed Companies) Regulations 2015, and a penalty of Rs737,500 was imposed under the Securities Act 2015.

Adjudication proceedings in respect of 8 cases were initiated against insurance companies/takaful operators. Amongst the main violations of the insurance regulatory framework was a failure to maintain proper books of accounts in violation of sections 34 and 45 of the Insurance Ordinance, 2000, inadequate amount of collateral in respect of insurance guarantees in contravention of the Credit Suretyship (Conduct of Business) Rules 2018 and non-payment of annual supervision fee in violation of Section 11(3) of the Insurance Ordinance, 2000.