SECP Pakistan

TABLE OF CONTENTS

1. Introduction
2. Case Background
3. Violations Identified
   • Regulation 13(1) and 14(3)
   • Regulation 6(3)(c)
   • Regulation 6(10)
4. Show-Cause Notice and Penalty
5. Appellant’s Arguments
6. Respondent’s Rebuttal
7. Findings of the Appellate Bench
8. Conclusion and Decision

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ORDER

1. Introduction

This Order disposes of Appeal No. 10 of 2022, filed by Messrs AKD Securities Limited (the “Appellant”) through Mr. Ilyas Haji Ahmed, Company Secretary. The appeal was filed under Section 33 of the Securities and Exchange Commission of Pakistan Act, 1997, against the Order dated July 30, 2021 (the “Impugned Order”), passed by the Director, Adjudication-I, SECP (the “Respondent”).

2. Case Background

The appeal pertains to compliance violations identified during a review conducted by the Securities and Exchange Commission of Pakistan (SECP). The review assessed adherence to the Securities and Exchange Commission of Pakistan (Anti-Money Laundering and Countering Financing of Terrorism) Regulations, 2018 (the “Regulations”).

3. Violations Identified

Regulation 13(1) and 14(3):
The Appellant failed to monitor customer relationships on an ongoing basis. The client, identified as a housewife with savings and inheritance as her source of funds, engaged in transactions inconsistent with her profile. No justification or evidence was provided for the unusual patterns.

Regulation 6(3)(c):
The Appellant did not conduct proper Customer Due Diligence (CDD). There was no adequate monitoring of accounts to detect deviations from expected activity.

Regulation 6(10):
The Appellant failed to conduct due diligence on existing relationships to verify beneficial ownership.

4. Show-Cause Notice and Penalty

A Show-Cause Notice (SCN) was issued on April 16, 2021. After a hearing on June 4, 2021, the Respondent imposed a penalty of Rs. 100,000/- for the identified violations.

5. Appellant’s Arguments

The Appellant contended that:

• Trading limits were assigned based on the client’s financial profile.
• Wealth statements were submitted, and transactions remained within documented limits.
• Any non-compliance was inadvertent and not wilful.

6. Respondent’s Rebuttal

The Respondent argued that:

• The Appellant did not adequately analyze or update the client’s profile.
• The transactions did not align with the client’s documented status.
• No evidence was provided to justify the unusual patterns or confirm proper examination.

7. Findings of the Appellate Bench

The Bench reviewed the arguments and records and concluded:

• The Appellant failed to comply with the Regulations.
• The absence of mens rea does not absolve the duty to ensure compliance.
• Obtaining a tax return alone is insufficient if trading patterns remain inconsistent with the profile.

8. Conclusion and Decision

The Bench finds no grounds to interfere with the Impugned Order. Therefore, the Appeal is dismissed without any order as to costs.

MQ/13/SEC
Appeal dismissed.