Non-compliance of Regulations

2017 CLD 1329 SECURITIES-AND-EXCHANGE-COMMISSION-OF-PAKISTAN Judicial Precedent

Ss. 282-D, 282-J & 282-MNon-Banking Finance Companies and Notified Entities Regulations, 2008, Regln.66-ACircular No. 23 of 2013, dated 6.12.2013, Cls. (1)(2)(3)SECP Circular No. 26 of 2015, Cl. (c)Securities and Exchange Commission of Pakistan Act (XLII of 1997), S. 33Non-compliance of RegulationsAppellant a non-Banking Finance Company, appointed Bank as one as distributor for its Open End Schemes

Facts revealed that appellant-company, prima facie, had not complied sub-Reglns. (b)(c)(d) of Regln.66-A of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations) cls.(1)(2)(3) of Circular 23 of 2013 and sub-clause (c) of Circular 26 of 2015

Show-cause notice under Ss.282-J(1), 282-M(1) & 282-D of the Companies Ordinance, 1984 was issued to the company, whereby it was called upon to show-cause as to why penal action could not be taken against it for the said contraventions

Answer to show-cause notice having not been found satisfactory, Commissioner (SCD) of the Commission, in exercise of its powers conferred by Ss.282-J & 282-M of the Companies Ordinance, 1984, imposed aggregate fine of Rs.500,000 on the company

Commissioner (S.C.D.) of the Commission, passed the impugned order for non-compliance of various Regulations

Distribution agreement, did not contain any clause with particular reference to avoidance of fraud and mis-selling by the Distributor, and the offering document, was also not provided to the Commission

Distributor had not used risk profiling questionnaire given by the company and used its own risk profile, as a result, also ignored the main factors of age, source of income and existing investment

Distributor, had not taken reasonable care to ensure suitability of the scheme to the Company

Company was responsible to ensure that updated account opening form was used by the Distributor

Distributor had not provided latest annual/semi-annual accounts to the respondent (investor)

No action had been taken by the Distributor to remove the discrepancies in various documents prior to the respondent accepting investment

Call Back Confirmation (C.B.C.) made to respondent did not mention regarding removal of those discrepancies

Company also failed to send account statement to the respondent, within the stipulated time

Impugned order was upheld by Appellate Bench, in circumstances.