Issuance of bearer shares or bearer share warrants: SECP empowers 2 adjudication depts to impose penalties

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has legally empowered Adjudication Department-I and II, Adjudication Division to penalise companies involved in issuance of any kind of bearer shares, bearer share warrants or any equity or debt security of a bearer nature.

In this regard, the SECP has issued two notifications here on Monday to introduce penal provisions for companies.

According to the amendment made in the Companies Act, 2017, the provisions relating to the prohibition on issuance of bearer shares, bearer share warrants, and similar equity or debt securities of bearer nature, as well as the manner of registration and cancellation in case any such bearer securities have been issued, are being introduced in order to prevent the misuse of companies from money laundering or terrorist financing abuses in line with the recommendations issued by the Financial Action Task Force.

Under section 60 A of the Companies Act, there is a prohibition on issuance of bearer shares or bearer share warrants etc.

According to the SRO 1355(I)/2020, the SECP has delegated the following powers and functions of the Commission under the Companies Act, and the rules and regulations framed thereunder to the Head of Department, Adjudication Department-I, Adjudication Division in relation to listed companies and licensed entities, except the companies licensed under section 42 of the Act: Power to impose penalty for contravention or default in complying with provisions of section 60A of the Companies Act.

Under SRO 1356 (I)/2020, the SECP has delegated the following powers and functions of the Commission under the Companies Act, the Limited Liability Partnership Act, 2017 and the rules and regulations framed thereunder to the Head of Department, Adjudication Department-II, Adjudication Division in relation to companies other than listed companies and licensed entities except the companies licensed under section 42 of the Act and limited liability partnerships: Power to impose penalty for contravention or default in complying with provisions of section 60A.

Under section 60 A of the Companies Act, there is a prohibition on issuance of bearer shares or bearer share warrants etc: Notwithstanding that anything contained in the National Investment (Unit) Trust Ordinance, 1965 or any other law, no company shall allot, issue, sell, transfer of assign any bearer shares, bearer share warrants or any equity or debt security or a bearer nature, by whatever name called, and any allotment, issue, sale, transfer, assignment or other disposition or any bearer shares or bearer share warrants or any other equity or debt security of a bearer nature, shall be void. For the purpose of this section, the term bearer shares or bearer share warrants means a negotiable instrument that accords ownership or control in a company to the person who possess such instrument and includes any other equity or debt security of bearer nature.

This amendment was introduced in order to prevent the misuse of companies from money laundering or terrorist financing abuses in line with the recommendations issued by the Financial Action Task Force (FATF).

Copyright Business Recorder, 2020