Appellant Bench: SMD of SECP fails to apply judicial mind in case against broker

The Appellant Bench of the Securities and Exchange Commission of Pakistan (SECP) has observed that the bench is the appellate quasi-judicial body of the Commission and while deciding appeals, it has to see whether the adjudicating authority has applied the relevant law in letter and in spirit or failed to demonstrate the desired application of law.
The bench order issued here on Tuesday revealed that the SECP Appellant Bench noted with great concern that while adjudicating the matter the Securities Market Division SECP has not applied a judicial mind. The most astonishing fact of the case is that an impugned order against the broker has been passed for non-filing of online statements; however, the show cause notice does not contain any such allegation, the SECP Appellant Bench added.
The order is in the matter of Appeal No. 46 of 2017, filed by a broker (the appellant) against the Order dated 28/04/17 (the impugned order) passed by the executive director (the respondent) under Section 150 of the Securities Act, 2015 (the Act).
Brief facts of the case are that it has been alleged by the respondent (SMD SECP) that the appellant in contravention of Pakistan Stock Exchange (the PSX) notice No PSX/N-5086 dated September 15, 2016 (the PSX Notice) and regulation 6(4) of the Securities Brokers (Licensing and Operations) Regulations, 2016 (the Regulations) had failed to file online monthly statements of net capital balance and liquid capital (the Statements) for the months of October 2016 and November 2016 and December 2016 (default period). The PSX further directed the appellant vide reminders dated December 16, 2016, and January 18, 2017, to file the Statements within 15 days of the subsequent month. The SECP also issued a reminder on December 28, 2016.
In view of stated violation, a show cause notice dated February 14, 2017 (the SCN) was issued; however, the appellant has not responded. The SCN proceeding was concluded through the impugned order and a penalty of Rs 300,000 was imposed on the appellant by the SECP.
The appellant has challenged the impugned order before the Appellate Bench (the bench) through the instant appeal and requested to set aside the impugned order whereas the respondent has prayed to dismiss the appeal.
The bench has heard the parties and perused the record. It has been noticed by the bench with great concern that while adjudicating the matter the respondent (Securities Market Division SECP) has not applied a judicial mind. The Securities Market Division SECP while establishing the violation of non-filing of online statements had relied upon the Regulation 6(4) of the Regulations and the PSX notice; however, none of these provisions require online filing of the statements. The most astonishing fact of the case is that the impugned order has been passed for non-filing of online statements; however, the SCN does not contain any such allegation.
The bench is the appellate quasi-judicial body of the Commission; therefore, while deciding appeals under Section 33 of the SECP Act, 1997, it has to see whether the adjudicating authority has applied the relevant law in letter and spirit or failed to demonstrate the desired application of law. In the present case, the appellant was penalized for the violation which neither was alleged in the SCN nor was it a requirement of the law. Accordingly, the entire proceedings against the appellant, including the impugned order are absolute nullity. Therefore, the bench hereby sets aside the impugned order being passed without any legal sanction. The appeal is allowed without any order as to cost, the SECP Appellant Bench order added.