Compliance Report on SROs: SECP issues orders against 3 insurance companies

The Securities and Exchange Commission of Pakistan (SECP) has issued orders against three different insurance companies which failed to submit compliance report on statutory regulatory orders (SROs) issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions and intimation from the National Counter Terrorism Authority/Ministry of Interior regarding updates in the list of proscribed persons.
In this regard, the SECP Commissioner Insurance has issued orders against three insurance companies registered under the Insurance Ordinance, 2000 (the "Ordinance") to carry on the businesses of non-life insurance in Pakistan. In the first case, the SECP has dropped proceedings against an insurance company which apparently submitted compliance report on SROs issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions and intimation from the National Counter Terrorism Authority/Ministry of Interior regarding updates in the list of proscribed persons.
Through a separate order against another insurance company in the same matter, the SECP has imposed a fine of Rs 100,000 on another insurance company due to the established non-compliances with the warning to ensure strict compliance with the directive in future. In this case, the SECP Commissioner Insurance carefully examined and gave due consideration to the written and verbal submissions of the company, and have also referred to the provisions of the Regulations, SRO 245(I)/2019 and/ or other legal references. The SECP Commissioner Insurance was of the view that the violation of SRO 245(I)/2019, is clearly established, for which the respondents may be penalised in terms of Section 40A of the SECP Act.
In the third case, the violation of SRO 245(I)/2019 is clearly established, for which the Respondents (Issuance Company) may be penalised in terms of Section 40A of the Act. The SECP has taken lenient view and do not impose fine on the Board of Directors of the Company due to the fact that the business of the Company is ceased and the authorised representative has assured to submit compliance report in respect of all emails sent by the Commission in future. However, the respondents are hereby warned and directed to ensure strict compliance with the directive in future, the SECP third order added.
Details of the first order revealed that the SECP has closed the proceedings without any adverse order against the respondents. According to the SECP Commissioner Insurance in this specific case, the SECP Order shall dispose of the proceedings initiated by the Commission against Insurance Company Limited, its chief executive and directors for alleged contravention of SRO 245 (1)/2019 (the "directive"). The Company and its directors shall be collectively referred to as the "Respondents" hereinafter.
As per the directive, all regulated persons are required to submit compliance report on statutory regulatory orders issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions and intimation from the National Counter Terrorism Authority/Ministry of Interior regarding updates in the list of proscribed persons under the Anti-Terrorism Act, 1997, within three days of receiving the same, through email by authorised officer of the regulated person.
However, the Company failed to submit the compliance report in three days, the SECP said. The order referred to emails issued by the SECP to the insurance company in this regard. In this respect, the Commission issued reminder letter dated May 9, 2019 to the Company to comply with the above-mentioned emails within seven days of the date of receipt of the letter. Moreover, reminder was also sent through email dated May 9, 2019 on the email address. However, the Company failed to submit any response to the reminder letter or email dated May 9, 2019 until the date of this show cause notice.
The directive dated February 22, 2019 provides that, any person to whom this directive applies and who contravenes or fails to comply with the requirements of this directive or submits a return which is false in material respect or where under a misstatement is made, shall be liable to imposition of penalty under Section 40A of the Securities and Exchange Commission of Pakistan Act, 1997 (the "Act") , which may extend to ten million rupees and where such contravention is a continuing one, with a further penalty which may extend to one hundred thousand rupees for every day after the first during which such contravention continues, SECP said.
In view of the above, it appeared that the Company failed to comply with SRO 245(I)/2019 for which, the Company and its Board of Directors were liable to be penalized under Section 40A of the Act. The directive dated February 22,2019 state that: "iii. Compliance report on statutory regulatory orders issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions and intimation from National Counter Terrorism Authority/Ministry of Interior regarding updates in list of proscribed persons under the Anti-Terrorism Act, 1997, shall be submitted 'within three days of receiving the same, through email to [email protected] by authorised officer of the regulated person. Accordingly, a show cause notice was issued to the Respondents, calling upon them to show cause as why the fine as provided under Section 40A of the Act should not be imposed on for the aforementioned alleged contraventions of the law.
"The authorized representative, submitted comments on behalf of the Respondents, vide letter dated June 12, 2019. The show cause notice has been issued to us under an impression that that we did not reply to various emails sent by the Commission. Whereas in fact we have replied to all emails received."
"In the light of the above submission it is evident that all the emails were replied by us, which can be checked from the recipients portal, thus there is no non-compliance on the part of the company under S.R.O. 245(1)/2019, hence, do not attract any penal action under section 40A of the Securities and Exchange Commission of Pakistan Act 1997. Therefore, it is requested by taking a lenient view the Show Cause Notice under reply may kindly be withdrawn and any action in consequence may be condoned without penalty," the authorized representative of the company added.
The Company opted to appear for the hearing through video link from Company Registration Office (CRO) at Karachi. During the hearing, the authorized representatives reiterated the comments submitted vide email dated June 12, 2019 and maintained that the Company responded the emails received from the Commission. They, however, argued that some of emails as mentioned in the SCN were not received by the Company. The authorized representatives were advised to furnish evidence whether the Company responded to final reminder letter dated May 9, 2019 issued to it prior to issuance of the show cause notice.
Thereafter, as directed, the Company vide letter dated July 11, 2019 provided a copy of the reply submitted to the Commission in response to the letter dated May 9, The Company also annexed the copies of emails sent to the Commission conforming compliance with the directive. Clause (iii) of the directive states that Compliance report on statutory regulatory orders issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions and intimation from Nation Counter Terrorism Authority/ Ministry of Interior regarding updates in list of proscribed persons under the Anti Terrorism Act, 1997, shall be submitted within three day of receiving the same, through email.