ISLAMABAD - In order to increase rate of regulatory compliance, the Securities and Exchange Commission of Pakistan has made annual on-site inspection mandatory for all licenced entities including the brokerage houses.

The SECP believes that strong regulatory environment based on international best practices is essential for the development of a modern corporate sector in Pakistan.

 Therefore, to ensure the compliance of all rules and regulations by licenced entities the SECP has decided to conduct the annual onsite inspection and in this regard the SECP’s will increase its enforcement capacity by 200pc. The enforcement departments will be trained and equipped with latest and effective tools of auditing.

Beside annual on-site inspection of all licenced entities, quarterly offsite monitoring will also be conducted. This will increase transparency, investor confidence and foreign portfolio investment. 

The companies, that will refuse annual inspection to SECP’s enforcement team, will be imposed with heavy penalty and suspension of the licences wherever applicable in the law.

The maximum penalty for specialised companies including assets management companies, leasing firms, housing finance services, real estate investment funds, mutual funds and pension schemes for the refusal of inspection is up to Rs 50 million as well as cancellation and /or suspension of the licence.

The maximum penalty for the brokerage houses, credit rating agencies, depository companies and clearing companies is up to Rs 100,000 and   Rs1 million for insurance companies.

In the past the SECP took action against defaulters by filing criminal complaints and sometimes referring those cases to the NAB. However, in order to ensure compliance with all the relevant statutory requirements, it is necessary that offsite monitoring and onsite inspections should be regularly conducted for all licences/ licenced entities.

In order to have effective enforcement and to adopt the best international practices, the SECP has decided that the following divisions/ departments will conduct offsite monitoring once in each quarter and onsite inspection once in a year of each of their following licencee/ licenced entities as a policy with effect from July 1, 2013:  Specialised Companies Division, asset management services, investment advisory services (23), Investment finance services (7), leasing business (13), housing finance services (1), voluntary pension schemes (6), REIT management services (2) and Private equity and venture capital fund management services (3).

The maximum penalty for the refusal of inspection is up to Rs 50 million as well as cancellation and /or suspension of the licence.