Alleged misuse of funds: SECP findings lead to FIA case against food co

ISLAMABAD: An inspection and subsequent actions, including the initiation of investigation proceedings by the Securities and Exchange Commission of Pakistan (SECP) into the alleged misuse of funds by Unity Foods Limited, have led the Federal Investigation Agency (FIA) to register a criminal case over the alleged misuse of shareholders’ and company funds, falsification of accounts, and other serious financial irregularities.

Unity Foods is a public-listed company on the Pakistan Stock Exchange (PSX) and has raised funds from public shareholders. The case is particularly significant from an investor-protection perspective because the alleged irregularities include the possible diversion of funds raised from shareholders for identified business purposes.

According to the SECP reference, Unity Foods raised Rs3.75 billion through a rights issue in 2019 for expansion and diversification, including the acquisition of assets, additions to its refinery at Port Qasim, and the establishment of an oil terminal. SECP’s examination found that approximately Rs2.87 billion of these proceeds were allegedly diverted from their stated purposes, as the Company failed to provide evidence of the utilization of the same.

The SECP probe also identified several other transactions warranting further investigation.

These included alleged payments of Rs5.318 billion from company funds to the former CEO’s mother under the guise of loan receipts and repayments, for which appropriate banking instruments and board approvals were not produced. Another Rs2.6 billion was allegedly advanced through a subsidiary to two undisclosed parties, besides other related-party exposures and transactions.

The investigation also raised serious questions about the disposal of the company’s subsidiaries and the alleged use of Unity Foods’ funds, inventory and other resources for the benefit of connected entities of the accused.

The FIA will investigate the beneficiaries, movement of funds, and the role of directors, officers, and other persons involved in these transactions.

A major part of the case concerns the reliability of the company’s financial reporting. Material referred by SECP indicated an alleged Rs44.7 billion difference between the company’s published accounts and its internal SAP records.

The case also involves an alleged Rs5.2 billion discrepancy between inventory recorded in SAP and physical stock, around Rs5 billion in aged receivables without corresponding evidence of delivery of goods, and other accounting inconsistencies.

Such discrepancies are particularly significant for a listed company because shareholders, potential investors and lenders rely on published financial statements and corporate disclosures to assess a company’s financial position and make investment decisions.

Following its inspection, SECP initiated proceedings under the Companies Act, 2017. As some of the matters identified potentially constituted criminal offences falling outside SECP’s regulatory jurisdiction and administered legislation, the Commission referred the case to FIA under Section 41-B of the SECP Act, 1997 for further investigation and action under applicable criminal laws.

Based on the SECP reference and material available, FIA’s Corporate Crime Circle Karachi registered an FIR on August 29, 2026, under Sections 406, 420, 477-A, 109 and 34 of the Pakistan Penal Code against former management and other accused persons. FIA is now investigating the criminal liability of the accused as well as the role of other directors, officers, beneficiaries and connected parties.

The case reflects the importance of regulatory oversight of listed companies, particularly where public shareholders’ money is involved. SECP’s intervention is aimed at ensuring that funds raised from investors are used for disclosed purposes, financial statements present a fair picture of a company’s affairs, and those responsible for suspected misuse are held accountable under the law.

SECP Chairman Dr Kabir Ahmed Sidhu said the Commission would continue to take firm regulatory action to protect investors and uphold confidence in Pakistan’s capital market.

“Protection of minority shareholders is a fundamental responsibility of SECP. Funds raised from investors must be used for their disclosed purposes, and shareholders have a right to accurate and transparent financial information. SECP will continue to strengthen the oversight of listed companies and take appropriate action wherever shareholders’ interests are put at risk.”

The allegations remain subject to FIA investigation and determination in accordance with law.

Copyright Business Recorder, 2026