Insurance co's CEO: SECP upholds decision to impose fine of Rs 100,000

The Appellate Bench of the Securities and Exchange Commission of Pakistan (SECP) has directed the SECP to proceed against the company secretary of an insurance company for his failure to invite a director in four meetings of the board of directors.

The SECP Appellate Bench has also upheld the decision of the Director (Insurance) SECP to impose a fine of Rs 100,000 on the chief executive officer of the insurance company.

The brief facts of the case are that a director of an insurance company (complainant) filed a complaint alleging that the company had deliberately not invited him to participate in the Board of Directors (BOD) meetings of the company.

An on-site inspection team of the SECP was already conducting onsite inspection of the company. Out of seven meetings, the complainant was not invited to four meetings of the BOD.

It transpired that the affairs of the company were not being managed with integrity, due care and professional skills, which was in violation of the provisions of Section 12 of the Insurance Ordinance, 2000 (Insurance Ordinance). Therefore, a show cause notice dated 07/03/16 (SCN) was issued to the chief executive officer (appellant) and its directors, who prima facie authorized the contraventions of the provisions of the Insurance Ordinance.

The CEO of the company has preferred the appeal before the Appellate Bench (the Bench) on the grounds that the impugned order is bad in law and facts. During the hearing before the Bench, the CEO of the company argued that there is no provision in Insurance Ordinance that provides the respondent powers to impose a penalty for not inviting a director to the BODs' meetings.

The SECP Bench has heard the parties, i.e. chief executive officer of the insurance company and Director (Insurance) SECP. The Bench is of the view that there is sufficient evidence to prove that the CEO was not running the company in a sound and prudent manner as notices for the BOD meetings were not served on the director of the company (complainant).

The SECP Appellate Bench is of the view that argument of the CEO of the company that the mistake was inadvertent does not hold merit, given their recurrent nature. Furthermore, in the CEO's letter, it was claimed that the director intended to resign; however, no proof was provided, and the director has also denied it.

The SECP Appellate Bench does not concur with the CEO's argument that it was only the responsibility of the company secretary to send notices for BOD meetings as the appellant being the CEO is responsible for running the affairs of the company.

In view of the foregoing, the SECP Appellate Bench sees no reason to interfere with the impugned order of the Director (Insurance), SECP. The impugned order of the Director Insurance has been upheld by the SECP Appellate Bench.

The Bench has also noticed that prima facie company secretary also failed to discharge his secretarial responsibilities in a required manner, because as per the findings of onsite team, out of seven BOD meetings held during the period O 1/07 /14 to 30/06/15, the director was not invited to four meetings. Apparently, the company secretary also failed to perform his duty to ensure delivery of BOD meeting notices to the complainant, therefore, notwithstanding, the decision of this Appeal, the SECP Appellate Bench directs the respondent to proceed against the company secretary in accordance with law, if required, the Bench added.