The Securities and Exchange Commission of Pakistan (SECP) has issued a stern warning to an insurance company for non-compliance of provisions of the Insurance Ordinance 2000 after default has been established against the company. In this regard, the SECP has issued an order here on Monday.
According to the SECP order, the order shall dispose of the proceedings initiated against the company for not complying with Section 166 (Insurance of public property) read with Section 156 of the Insurance Ordinance, 2000. The SECP has carefully examined and given due consideration to the written and verbal submissions of the Company, and have also referred to the provisions of the Ordinance. The SECP was of the view that there has been an established default under the relevant provision of the Ordinance. The Representative of the notice has also admitted this as well and showed the intention and commitment of the Company to fulfil the statutory requirement as laid down under Section 166 of the Ordinance.
Before proceeding further, the SECP said that it relevant to discuss the duties of the Directors. The Directors, in addition to the day to day running of the Company and the management of its business, also have some 'fiduciary' duties ie duties held in trust and some wider duties imposed by statute and breach of these statutory duties will usually be a criminal offence, punishable by fine or imprisonment.
Hence the Directors are gauged against a higher standard of accountability which requires them to be vigilant and perform their duties with due care. In the instant case, however, the Directors have overlooked and failed to perform their duties with due care arid prudence. As the Directors are supposed to be well-aware of their legal obligations in connection with the aforesaid statutory requirement of Section 166 of the Ordinance ie the Directors of the Company were required to follow the Laws in letter and spirit at any cost, therefore, it could be legitimately inferred that the default was committed.
The arguments and submissions, made by the Company in its letter of January 20, 2014 and subsequently reiterated by the Representative during the course of the hearing in the matter, appear to be fair and justified.
After carefully examining the arguments and studying the facts and findings of the case as mentioned in the order, the default of Section 166 of the Ordinance is established. Therefore, the penalty as provided under Section 156 of the Ordinance can be imposed on the Company.
Section 156 of the Ordinance states that: "Penalty for default in complying with, or acting in contravention of this Ordinance.- Except as otherwise provided in this Ordinance., any insurer who makes default in complying with or acts in contravention of any requirement of this Ordinance or any direction made by the Commission, the commission shall have the power to impose flue on the insurer and, where the insurer is a company, any director, or other officer of the company, who is knowingly a party to the default, shall be punishable with fine which may extend to one million rupees and, in the case of a continuing default, with an additional fine which may extend to ten thousand rupees for every day during which the default continues.
In exercise of the power conferred on SECP under Section 156 of the Ordinance, the SECP, instead of imposing the penalty, take a lenient view, and thus, condone the Company due to mentioned facts. Also, the Company, its Directors and the Chief Executive are hereby issued stern warning that in case of similar non-compliance in future a stronger action will be taken.