However, the SECP official said that the names of the companies involved in such transfers were not being disclosed to protect interests of individual shareholders.

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) conducted strict monitoring of companies in January to safeguard investors’ interests and the enforcement department of the SECP penalised a number of companies, their directors and statutory auditors for non-compliance with the corporate laws and applicable accounting standards.

Through routine monitoring of financial statements, the commission identified transactions in a listed company where funds were being diverted to personal businesses of directors. The directors were using the money for their personal gains whereas no gains/profit was being paid to the listed company.

The private company of the directors defaulted on repayments and these funds, subsequently, were invested into the equity of the same defaulter private company.

This fact was not disclosed to shareholders and the SECP. The directors were penalised for their wrongdoings under the provisions of the Companies Ordinance, 1984, who preferred an appeal before the higher forum. However, the same has been set aside and the order was upheld.

In another case, the department initiated proceedings against directors of a listed company as huge amounts were apparently transferred to private company of the directors of the listed company.

“No approval from the board of directors and shareholders was obtained for making these payments,” an official of the SECP said, adding that in response to initial queries the company provided false information and documents.

The SECP, after a thorough probe, found that the company had made transfers on fake purchase orders.

However, the SECP official said that the names of the companies involved in such shady transfers were not being disclosed to protect interests of individual share-holders.

The SECP has imposed penalties on directors of the two companies for making unauthorised investment to associated companies without following legal requirements, while in another case, directors of a listed company were fined for making misstatement in annual audited financial statements.