Common SECP Penalties in Pakistan and How to Avoid Them

By Sadia Javed, Corporate Lawyer at SJ Law Experts, Islamabad

SJ Law Experts, Office No. 1, First Floor, Al Anayat Mall, G-11 Markaz, Islamabad

Call/WhatsApp: +92 3354112288

Introduction

The Securities and Exchange Commission of Pakistan (SECP) monitors corporate compliance under the Companies Act, 2017, SECP regulations, and AML/CFT rules. Its adjudication department actively issues notices, conducts hearings, and imposes penalties for non-compliance. In H1 FY 202425 alone, SECP adjudicated 1,849 cases and imposed PKR 962 million in fines.

This guide outlines the most frequent SECP violations and penalties, followed by strategic compliance solutions, helping businesses avoid costly regulatory pitfalls.

Overview of SECP Enforcement

SECP enforces via show-cause notices, hearings, and adjudication under Sections 40A–40AA of the SECP Act, 1997. Notable recent cases include:

PKR 581.5 million for public deposit violations
PKR 14.66 million in AML/CFT non-compliance
PKR 737,500 in shareholding disclosures

Preventive compliance is your best defense. Here’s how.

Common SECP Penalties

a) Late or NonFiling of Statutory Returns

Under Companies (Registration Offices) Regulations, SECP charges steep fines for delayed Forms = Form A (annual return), Form 29 (directors), and audited accounts:

Private company: up to PKR 2,000 + PKR 50/day late
Listed firms: up to PKR 10,000 + PKR 200/day late

b) AGM and Financials NonCompliance

Failure to hold AGMs on time, or submit audited financial reports, leads to similar fines and potential director disqualification .

c) UBO & AML/CFT Failures

Penalties under AML/CFT Regulations, 2020 include:

Non-KYC/CDD procedures
Incomplete risk categorization or enhanced due diligence
Non-reporting to Financial Monitoring Unit

SECP levied ~PKR 14.66 million fines in FY 23/24 for these shortcomings.

d) Public Deposit Infractions

Under Section 84 of CMIA—SECP imposed PKR 581.5 million fines for companies illegally accepting public deposits (secp.gov.pk).

e) Shareholding and Disclosure Violations

PKR 737,500 was penalized against listed companies for failure to report substantial acquisitions or board changes.

f) Unauthorized Financial Conduct

Generic breaches—such as illegal digital lending, unauthorised borrowing or mismanagement—carry penalties in the millions .

g) Sector-Specific Offenses

In securities markets, penalties include:

PKR 500k on brokerage firms for AML/KYC lapses
PKR 1 million on Karachi Stock Exchange for audit failures
Directors fined delays on beneficial ownership returns.

Why These Penalties Occur

SECP’s compliance audit prioritizes these violations due to their risks:

Protect investors and financial stability
Prevent money laundering
Discourage misuse of public funds

To avoid these pitfalls, companies need proactive governance.

How to Prevent and Mitigate SECP Penalties

a) Timely Statutory Filings

Maintain a compliance calendar for Form A, Form 29, AGM, and accounts
Automate reminders via secretarial support
Use eServices portal to file online with challans

b) Adhere to AGM/Financial Calendar

First AGM within 16 months, then annually
Prepare annual financials 30 days before AGM
Maintain meeting minutes securely

c) UBO, AML and KYC Compliance

File Form 45 (UBO register) on time
Implement AML/CFT framework annually (risk assessment & AML policy)
Conduct KYC/CDD per Regulations; document processes

d) Avoid Unauthorized Public Deposits

Only regulated institutions may accept deposits
Ensure proper disclosures, interest rate limits, and auditors before taking deposits

e) Timely Disclosure of Shareholding & Appointments

File shareholding changes within 7 days, director updates via Form 29
Monitor public share releases to avoid non-disclosure fines

f) Maintain Accurate Audit and Governance

Ensure engagement of authorized auditors only
Create audit, risk and compliance committees
Conduct self-reviews quarterly

g) Prepare for Inspections & Show-Cause Notices

Keep statutory records accessible
Respond quickly to SCNs (typically within 15–30 days)
Use expert advice before hearings

Steps to Build a Compliance Framework

Conduct a Compliance Audit under SECP requirements
Draft Policies: UBO, AML/CFT, whistleblower, KYC, director code of conduct
Designate Compliance Team: company secretary or legal lead
Train Stakeholders: directors, finance, secretarial
Automate Calendars & Notifications
Simulate Scenarios: AGM, SCNs, financial deadline lapses

What to Do If You Receive a ShowCause Notice

Upon receiving an SCN, you should:

Review ground of violation
Gather documents and evidence
Draft a legal reply citing relevant law and facts
Engage counsel before hearings
Negotiate or comply to avoid harsh penalties

Role of a Corporate Lawyer

As your legal advisor, SJ Law Experts helps you by:

Auditing compliance and identifying gaps
Drafting and filing forms and returns
Structuring UBO and AML frameworks
Supporting during SECP inspections or SCNs
Representing in hearings and appealing orders
Training your team and maintaining calendars

Case Studies: Lessons from Enforcement

Case 1: Late Annual Return: A private firm missed filing Form A. The delay resulted in PKR 2,000 + daily fines. Prompt filing plus waiver petition reduced the penalty by 80%.

Case 2: AML NonCompliance: A brokerage lacked AML policy. SECP fined PKR 500,000. Post-penalty, they implemented full KYC/CDD controls and risk-based monitoring—avoiding repeated violations.

Case 3: Public Deposit Violation: An NBFC accepted deposits with high interest rates. SECP imposed PKR 100 million of fines. Immediate restructuring and regulatory approval voided ongoing penalties.

Trends in SECP Enforcement (2023–2025)

Penalty volumes (~PKR 962 million) show stricter compliance enforcement
AML/CFT moves are now a priority
Public deposit concerns trigger bulk actions
Technology: e-Services and faster adjudication

Area	Common Violation	Prevention Tip
Statutory Filings	Late Form A, 29, AGM, accounts	Compliance calendar
AGM/Accounts	Not holding AGM or late accounts	Schedule & audit early
UBO/AML/KYC	Missing or out-of-date registers/policy	Annual risk & register updates
Deposits	Unauthorised inflows from public	Consult before accepting
Disclosures	Late shareholding/director updates	Monitor changes & file promptly
Audits	Unauthorized auditors, missing QC	Use SECP-approved auditor
SCNs	Weak response, delay in hearing	Quick counsel & defense

SECP penalties are preventable with proactive compliance, robust frameworks, and professional support. Companies that stay ahead maintain reputation, reduce risk, and build investor trust.

📞 Contact SJ Law Experts

Sadia Javed, Corporate Lawyer

SJ Law Experts, Office No. 1, First Floor, Al Anayat Mall, Above Faysal Bank Ltd., Islamabad

Call/WhatsApp: +92 3354112288

Email: SJLawExperts@gmail.com