SECP issues notices to foreign firms seeking details of local investments

ISLAMABAD: Zafar Hijazi, chairman Securities and Exchange Commission of Pakistan (SECP) said on Friday notices to 9,500 foreign companies have been issued to obtain information about investments made by Pakistani investors.

“In addition, 60,000 active local companies have been advised to provide the required information,” Hijazi told a news conference. “Therefore, around 70,000 have to comply with the SECP’s notices and many companies have already started giving their respond.”

The SECP has set a deadline of 30 days for response from such companies. He said the new provisions of section 452 of the Companies Ordinance, 2016 relating to the Companies Global Register of Beneficial Ownership empowered the regulator to maintain the record shares and other investments held in foreign companies by its shareholders.

Hijazi said investors having ten percent or more shares in a foreign company would report the details of their holding “on a specified form within 30 days of acquiring such position.”

The chairman also explained, in detail, the newly introduced section in the ordinance.  “Any investment in securities or other interest by a company incorporated under the Companies Ordinance in a foreign company or a body corporate shall also be reported to the registrar along with the annual report,” he said. “Any contravention or default in complying with the above provisions shall be deemed as an offence and liable to a fine.”

Hijazi said the purpose of introducing new provision in the Companies Ordinance, 2016 “is to keep record of information received by the companies and the regulator about the shares and other investments held in a foreign company by its shareholders.”

He further stated that the new amendment has been introduced keeping in view the international practices and is aimed to provide a self-reporting mechanism for collection and consolidation of beneficial ownership data and its access to users and other governments/ agencies in evaluating their credentials.  “The new provision is aimed at maintaining transparency and also helpful in addressing the illicit financial flows and will tackle corruption, money laundering and terrorist financing,” the chairman said.

He pointed out that the said provision is being criticised in the media that this should have been incorporated in tax law rather than corporate law.

Hijazi said the number of registered tax payers, in Pakistan, is very low in number vis-à-vis the number of registered companies and “in case the provision of maintaining global register is incorporated in tax law, the purpose and intent of the concept shall not be fully achieved.”

“Further, the commission has already developed an electronic data bank of beneficial ownership for local companies and has the capacity to design the same for storing information related to foreign shareholding in a better way,” the chairman SECP added.