Corporate sector cautioned: non-compliance of regulatory obligations a serious offence: SECP

The Appellate Bench of the Securities and Exchange Commission of Pakistan (SECP) has cautioned the corporate sector that the ignorance of law is not an excuse to evade the consequences of blatant violations of the regulatory legal framework of the SECP. While deciding a case against a securities company of stock market, a two-member SECP Appellate Bench observed that the Bench has heard the parties and perused the record. Non-compliance of quarterly accounts, half-yearly accounts, annual accounts and bank details are apparent and established; therefore, the appellant (company) cannot be exonerated. Furthermore, ignorance of law is not an excuse to evade the consequences of blatant violations of the regulatory legal framework. However, as the appellant has not started its operations and is in process of licence renewal, thus, the SECP bench is inclined to take a lenient view in the matter. Therefore, while maintaining the impugned order, appellate bench, hereby, reduce the amount of penalty to Rs 200,000.
According to the SECP Appellate Bench, the order is in the matter of appeal nO 90 of 2017 filed by a Securities (Pvt) Limited (the appellant) against the order dated 30/05/17 (the impugned order) passed by the Commissioner (SMD) under Section 150 of the Securities Act, 2015 (the Act).
Brief facts of the case are that the appellant, in contravention of Securities and Exchange Commission of Pakistan (the Commission) circular nO 4/2013 dated 16/04/13, failed to file quarterly financial returns through online Financial Reporting System (FRS) for the specified periods;
In view of Pakistan Stock Exchange (PSX) notice nO PSX/N-798 dated 08/02/17, the appellant was required to send the details of all its bank accounts to the Securities and Exchange Commission of Pakistan (Commission). However, despite the Commission's reminder dated March 17, 2017 the appellant failed to comply with the requirement.
The appellant also failed to submit a hard copy of its annual accounts for the period ended 30/06/16 to the Commission, as required by the PSX notice nO PSX/N-798 dated 08/02/17, Notice nO PSX/N-797 dated 08/02/17 and notice nO PSX/N-1118 dated 22/02/17. In this regard, the Commission also sent a reminder dated 16/03/17 to the appellant, however, compliance was not observed. The appellant also failed to submit a hard copy of the half yearly accounts for the period ended 31/12/16 to Commission, as required through the PSX notice nO PSX/N-798 dated 08/02/17. In this regard, the Commission also sent a reminder dated 17/03/17 to the appellant, however, compliance was not made.
A show cause notice dated 10/04/17 was issued to the appellant for the non-compliance. The appellant filed its reply vide a letter dated 21/04/17. Hearing in the matter was held on 26/04/17, which was attended by CEO (representative) who stated, "The company is in process of its license renewal.
As the company does not start its operations, it was presumed that submission of financial data through FRS is not applicable on firm. The company has now hired charted accountant to upload the date in FRS". The respondent, being dissatisfied with the response of the appellant imposed a penalty of Rs 400,000 due to failure to discharge regulatory requirements.
The appellant preferred this appeal and reiterated the submissions whereas, the respondent (commissioner SECP) has rebutted the grounds of appeal and stated that the impugned order has been passed in accordance with the law and non-compliance of the regulatory obligations is a serious offence, which cannot be ignored. The appeal is disposed of accordingly, without any order as to cost, the Appellate Bench added.