'Fit and Proper Criteria': A CEO must have at least seven-year experience in senior management position: SECP

The Securities and Exchange Commission of Pakistan (SECP) has observed that the 'Fit and Proper Criteria' laid down for appointment of Chief Executive Officer (CEO) of a company under the NBFC Regulations, 2008 requires a CEO to have minimum experience of 7 to 10 years in a senior management position.
According to an SECP order recently issued by the Appellate Bench comprising SECP Chairman Tahir Mahmood and Commissioner Securities Market Davison (SMD) Zafar Abdullah, the bench has set aside the Impugned Order of the SECP. The matter has been remanded to the respondent department. The Head of SECP department shall decide the application for appointment of the Appellant on merit afresh without being prejudiced by the Impugned Order within 30 days. In case of rejection, a speaking order should be passed by the SECP.
The order is in appeal No 56 of 2013 was filed under section 33 of Securities and Exchange Commission of Pakistan (the "Commission") Act, 1997 against the order dated 12/07/13 (the "Impugned Order") passed by the Respondent (SECP).
The facts leading to the case are that a leasing company submitted an application dated 31/07/13 for appointment of Appellant as its Chief Executive Officer ("CEO"). The department examined the application and the Appellant was not found to be fit and proper person for the post of CEO of the Company. The application was rejected by the department vide letter dated 28/12/12. The Appellant, aggrieved by the decision of the department, filed writ petition in the Islamabad High Court (the "Court") and the Court, vide order dated 23/05/13 ("Court Order") disposed of the writ petition with the observation that the department shall reconsider the Appellant for the position and if it disapproves the Appellant again then reasons for the disapproval shall be written.
As per the order of the Court, the department reconsidered the application for appointment of the Appellant as CEO of the Company and passed the Impugned Order, wherein, the SECP disapproved the Appellant for the said position as he did not possess minimum 7 to 10 years work experience in a senior management position as required by clause (c) (iii) of Fit and Proper Criteria laid down in the NBFC Regulations, 2008.
The Appellant filed the instant appeal against the Impugned Order. The Appellant's representative argued that the Appellant has been serving in financial institutions for approximately 23 years in different capacities and fulfils the criteria to be CEO of the Company. The Appellant's representative provided details of the Appellant's work experience to the Appellate Bench.
It was further argued that, as directed by the Court in the Court Order, if the SECP had felt that the Appellant does not fulfil the criteria to be CEO, then, detailed reasons of refusal should have been provided in the Impugned Order. However, the SECP issued the Impugned Order without conveying detailed reasons of refusal to approve the Appellant as CEO of the Company. It was prayed that the Impugned Order may be set aside on this ground alone and the application of the Appellant may be reconsidered by the lawful authority.
The department representatives argued that clause (c) (iii) of Fit and Proper Criteria laid down in the NBFC Regulations, 2008 requires a CEO to have minimum experience of seven to ten years in a senior management position. Clause (c) (iii) is reproduced for ease of reference:
(c (iii) "the chief executive should have a minimum experience of seven to ten years in a senior management position, preferably in the regulated financial services sector; " It was argued that as per information on record, the positions previously held by the Appellant were not of senior management position, therefore, the SECP was right in declining the application of the Company for appointment of the Appellant as CEO of the Company. Further, the Court directed the department to reconsider the application of the Appellant and in case of disapproval to communicate the reasons for the same to the Appellant and the Company. In compliance with the Court Order, the SECP conveyed the decision along with reasons to the Appellant and the Company through the Impugned Order.
The SECP bench has gone through the Impugned Order and intends to dispose of this appeal. The Appellant has served at senior positions as per information provided during the hearing. Further bare reading of the Impugned Order reveals that it is not a speaking order as no reasons were made out for the decision made by the SECP as required in the light of court direction, SECP Appellate Bench order added.