The Securities and Exchange Commission of Pakistan (SECP) has observed that the insurance company and its "Directors" are required to seek approval of the Commission before elections of the Company's Directors under Insurance Companies (Sound and Prudent Management) Regulations, 2012 and Insurance Ordinance, 2000.
According to a SECP order issued here on Wednesday, the Commission has issued an order against an insurance company where default of Regulation 2(2) of the Regulations and Section 12(1)(b) read with Section 11(1)(f)of the Ordinance has been established. The SECP has rejected the company's impression that if the same persons are re-elected on the board as Directors of the Company then there would be no need for seeking the Commission's approval under the said Regulations.
In exercise of the power conferred on SECP under Section 63(1) and Section 156 of the Ordinance, instead of directing the Company to cease entering into new contracts of insurance or even imposing the penalty onto the Company and/or its Directors (including the Chief Executive), takes a lenient view, and thus, condone the Company and its Directors (including the Chief Executive) due to 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 would be taken, SECP said. The SECP said the concerned persons have not assumed the charge of office of the Directors and the Chief Executive Officer of the Company with the approval of the Commission, thereby it appeared that the Company has contravened the provisions of Regulation 2(2) of the Regulations and Section 12(1)(b) read with Section (l)(f) of the Ordinance, for which punitive actions as provided under Section 63(1)and Section156 of the Ordinance may be invoked.
Accordingly, the show cause notice was issued to the Company and its the then so-called Directors, calling upon them as to why the penalty, as provided under Section 156 of the Ordinance, should not be imposed upon the Company and/or its then so-called Directors (including the then so-called Chief Executive) for not complying with provisions of Regulation 2(2) of the Regulations, and Section 12(1)(b) and Section 11(1)(f) of the Ordinance.
The Company stated that there is no change in the board of directors and that the same members were elected as directors of the Company, which were previously serving as the directors of the Company. The Company also stated that they were under the impression that if the same persons are re-elected on the board as Directors of the Company then there would be no need for seeking the Commission's approval under the Regulations, and also mentioned that the application for seeking approval has now been filed with the Commission for its approval. Lastly, the Company prayed before the Commission to take a lenient view in the instant matter and assured that such an oversight of law on part of the Company will not occur again.
The SECP order said the company's representatives further stated that the Chief Executive & Directors and the Company have now obtained the approval of the Commission under the Regulations, and that the non-compliance was merely as a result of the misunderstanding of the applicability of the Regulations as to whether these will be applicable onto the reelected Directors, or not. Thereafter, the Company representatives further assured that the Company and all of its "Directors" will ensure compliance with these Regulations in future.
The SECP has carefully examined and given due consideration to the written and verbal submissions of the Company (through the Company's representatives), and have also referred to the provisions of the Ordinance and the Regulations. The SECP is of the view that there has been an established default of Regulation 2(2) of the Regulations, and Section 12(1)(b) and Section 11(l)(f) of the Ordinance, as the Company and its "Directors" were required to seek approval of the Commission before elections of the Company's Directors were held on April 30, 2013.
However, it has been given to understand/ believe that the Company and the persons appointed as the Directors and the Chief Executive of the Company have unintentionally contravened the provisions of Regulation 2(2) of the Regulations, and Section 12(1)(b) and Section 11(1)(f) of the Ordinance, and that it was merely an oversight on part of the Company and the persons appointed/ elected to act as Directors of the Company, SECP added.