ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has initiated proceedings in 54 show-cause notices issued during past two months and completed current proceedings in 50 cases against the erring management and companies’ auditors for various violations of laws.
In a statement issued on Thursday, the SECP said that it had initiated 54 show-cause proceedings during October – November 2016 and concluded 50 current proceedings, against the erring management and companies’ auditors for various violations of the Ordinance.
The department has adopted focused approach towards certain regulatory areas to ensure meticulous compliance which includes inter corporate financing, mandatory maintenance of website and submission of quarterly reports. The SECP, after giving the companies reminders through media to have mandatory company’s website rendering critical information to current and potential investors, initiated 17 new show-cause proceedings against those who failed to do so.
The relevant department also concluded 13 pending proceedings against delinquent companies. The mandatory website, with the promulgation of New Companies Ordinance, 2016, shall also host the placement of annual and quarterly accounts, in addition to electronic transmission to the SECP and shareholders, which shall improve the filing of annual and quarterly accounts. The department concluded 14 proceedings initiated for delay/non-filing of quarterly accounts, penalized companies to send the message that SECP shall not tolerate holding back of critical financial information to the shareholders.
The SECP also took a stern action against those companies that passed on undue benefit to their associated companies by extending huge funds under the garb of abnormal trade debts, without the approval of the shareholders. The companies did not recover any markup on such funds which were mobilized and exposed the company’s liquidity to undue stress.
The department has strengthened its focus on the quality of audits and proceedings against auditors of a company for not discharging their duties in line with applicable provisions and failure to bring out misrepresentation in the financial statements of the company. Instances were observed where private companies having paid-up capital above Rs7.5 million had appointed unqualified person as their statutory auditors.
The unqualified persons appointed as statutory auditors lack the knowledge and training required to undertake the audit. In most cases, they were not even familiar with the content and format of the audit report laid down by the Companies Ordinance, 1984. During the month the department penalized an unqualified person appointed as statutory auditors of a private company.
The department launched investigation against a listed company for providing incorrect information in its prospectus at the time of public offering, which despite subsequent communication by the department was not provided to the SECP.
The department initiated fresh show cause proceedings, among others, for failure to comply with legal provisions in respect of unauthorized investment in associated companies, incorrect and false statements in the accounts, sale of company’s assets without the approval of shareholders, delay in deposit of provident fund amount, discharge of duties by auditors, filing of interim accounts for listed companies, non-holding of annual general meetings (AGMs) and board of director’s meetings, unauthorized purchase by a company of its own shares company etc. In this regard 72 shareholders’ complaints were successfully resolved to the satisfaction of the aggrieved shareholders.
During the period, a cooperation agreement was signed between the SECP, International Finance Corporation (IFC) and Centre for International Private Enterprise, for conducting awareness sessions on Principles of Corporate Governance for Non Listed Companies.
