SECP’s supervision division root of the problems
Staff Report
ISLAMABAD: The Islamabad High Court (IHC) has overturned the Securities and Exchange Commission of Pakistan’s (SECP) ban on Crescent Star Insurance Limited’s (CSIL) guarantee business, terming the regulator’s action illegal.
Legal and market observers are viewing the judgment as a significant rebuke of the regulator’s enforcement culture. The implications of the SECP’s flawed decision and the IHC ruling are still being debated in corporate and financial circles.
The court found that the SECP’s December 2024 order barring CSIL’s guarantee business violated the Insurance Ordinance, 2000. It stressed that the regulator is legally bound to allow an insurer to submit a compliance plan before taking coercive action, a safeguard that was ignored in this case.
The court also noted that CSIL’s guarantee business is a recognised form of non-life insurance and that its use of facultative reinsurance was a lawful commercial practice not subject to additional reinsurance requirements.
The ruling underlines that regulators must operate within their legal boundaries; otherwise, they risk eroding the very market confidence they are mandated to protect, said a lawyer. The decision has reinforced the perception among some businessmen that the SECP’s investigative and adjudicatory arms often act in haste, disregarding legal requirements.
The SECP had accused CSIL of issuing guarantees worth Rs229 billion without valid collateral or reinsurance, alleging misrepresentation after a reinsurance company denied any agreement. However, the court dismissed these claims, citing procedural lapses. Since the ruling, CSIL has resumed operations and informed the Pakistan Stock Exchange.
Some stakeholders, speaking on condition of anonymity, said the case must prompt an internal review at the SECP. They warned that arbitrary enforcement decisions make Pakistan appear high-risk to investors, driving capital away. The damage, they stressed, is systemic, not case-specific. They said the SECP’s Supervision Division has become a significant obstacle for businesses and the regulator’s credibility.
Frequent court rejections of its decisions point to unprofessional conduct and institutional failure. Key assignments should be entrusted to professionals who uphold the law and operate without personal or hidden agendas.
Analysts believe the decision could help deter regulatory overreach but caution that without structural reforms at the SECP, similar disputes are likely to recur. The episode, they say, is a reminder that in Pakistan’s fragile investment climate, regulatory missteps can be just as damaging as corporate misconduct.
They argue the case should prompt lawmakers and senior authorities to strengthen oversight of the SECP’s decision-making processes. Without transparent enforcement and consistent application of rules, Pakistan risks further weakening its already fragile investment environment, deterring both local and foreign capital at a time when economic recovery remains uncertain.
