SECP slaps Rs962 million in fines on corporate violators in six months

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) said on Friday it had imposed fines of nearly Rs1 billion on companies and individuals for violating various laws and regulations in the first half of the current fiscal year.

The SECP said it had decided 1,849 cases of violations and issued 179 orders for corrective measures from July to December 2023, with the help of its in-house Adjudication Division to promote compliance and transparency in the corporate sector.

The SECP's quasi-judicial arm maintains independence and minimizes arbitrariness in decision making while adhering to laws and international best practices.

"The Commission effectively enforced its laws in the first half of FY 2024-25, deciding 1,849 cases of violations and imposing penalties of approximately Rs962 million for corrective measures," it said in a statement.

"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."

The SECP said a total of 11 orders were issued under Section 84, resulting in a penalty of Rs581.50 million. "Directors of such companies were also disqualified from holding the office for five years using commission’s powers under Section 172 of the Companies Act, 2017," it added.

Additionally, a penalty of Rs1.750 million was also imposed via 11 orders against listed companies for violating Section 199 of the Companies 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 Rs13.265 million 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 AML/CFT Regulations 2020 for alleged contraventions of mandatory AML/CFT regulations, including deficiencies in KYC/CDD processes, customer identity verification, risk categorization, unapproved AML policy documents, and Targeted Financial Sanctions obligations." The total penalty imposed was Rs14.66 million.

Five orders were issued for non-disclosure of substantial acquisition in voting shares of listed companies, and a penalty of Rs1.2 million 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.

Moreover, 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 eight cases were initiated against insurance companies/takaful operators. Amongst the main violations of the insurance regulatory framework were failure in maintaining proper books of accounts in violation of section 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.

"The SECP remains committed towards an effective, transparent and rigorous enforcement of its administered laws in the future while simultaneously continuing on the path towards digitization and promoting an enabling environment for the businesses," the statement added.