The Securities and Exchange Commission of Pakistan (SECP) has directed State Life Insurance Corporation of Pakistan and its directors to improve SLIC's governance system by putting appropriate internal control systems in order to avoid any lapses in future.
According to an order released by the SECP here on Wednesday, the SECP has carefully examined and given due consideration to the submissions of the respondents (SLIC, its directors and/ or any of its authorised representatives in the instant matter) and has also referred to the provisions of the Insurance Ordinance, 2000 and other legal references.
The SECP is of the view that the respondents have provided the policy status and collection slips of 500 policy holders. Further, the fraud at its Lahore central zone, highlighted by the statutory auditors is being investigated by NAB, therefore, no conclusion can be drawn till investigation is completed in this regard. For rest of the issues, the SECP is of the view that the management of corporation has not acted in a vigilant and professional manner and has even not given due consideration to the issues highlighted by the statutory auditors of sue. However, keeping in view the submission and argument presented at the hearing the SECP hereby advises SLIC and the respondents to improve SLIC's governance system by putting appropriate internal control systems in order to avoid any such lapses in future.
The SECP order has disposed of the proceedings initiated against the said corporation and its directors, for alleged contravention of section 45 of the Insurance Ordinance, 2000, (the Ordinance) by the Insurance Division of SECP (department).
The examination of the financial statements of SLIC and further information called for by the department in this regard revealed that the statutory auditors of SLIC to the board of directors of SLIC have highlighted some observations. Moreover the department vide letter dated September 9, 2016 advised SLIC to submit ledger accounts of 500 policy holders of the Pakistan Life Fund. The SLIC in response provided a list containing names, policy numbers, premium due dates, collection dates and premium amounts in respect of 500 policy holders instead of providing the aforesaid ledger accounts.
The SLIC's response to the observations was not found satisfactory, therefore, a show cause notice was issued to the respondents by the SECP, thereby calling upon them to show cause as to why punitive action may not be taken against them in terms of Section 156 of the Ordinance for the alleged contravention of Section 11(l)(h) and Section 45 of the Ordinance, the order added.
Summary of arguments and conclusions in respect of each issue: Provision of Ledger Accounts of the Policyholders: The respondents have provided the policy status and collection slips of 500 policy holders. The respondents have further submitted that they are strengthening their internal controls and are moving towards implementation of ERP-based software system for the purpose of minimising the risks in future.
Un-reconciled Subsidiary Records: The respondents are in the process of eliminating un-reconciled difference of Rs 25 million in general ledger and schedules.
The respondents argued that the difference is between the general ledger and memorandum record and will have either little or no impact on the financial statements. Fixed Assets Register: The difference in fixed assets register caused by depreciation has been rectified by the respondents. Subsidiary records of held to maturity investments and discrepancies in Pakistan Investment Bonds (PIB) schedule:
The difference between the method used by the SLIC and the auditor is immaterial to the financial statements. The respondents have sent PIB working to State Bank of Pakistan to verify the calculations and would subsequently adjust the profit accordingly.