Illegal crackdowns reveal systemic flaws in regulator’s oversight
Staff Report
ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has suffered a severe blow to its credibility after the Islamabad High Court overturned its actions against Crescent Star Insurance Limited (CSIL), exposing repeated flaws in enforcement, procedural discipline, and regulatory judgment.
The twin legal setbacks reveal a troubling pattern of mismanagement, raising serious questions about the regulator’s capacity to enforce rules fairly while maintaining investor confidence in Pakistan’s insurance sector.
In the latest ruling delivered by Justice Mohsin Akhtar Kayani in July 2025, the court set aside SECP’s order barring CSIL from issuing new guarantees or renewing existing ones. The regulator had accused the company of issuing guarantees without adequate reinsurance.
CSIL countered that its operations rely on facultative reinsurance—a case-by-case arrangement distinct from treaty-based coverage, which does not trigger the same reporting obligations. The company argued SECP acted prematurely, halting operations without offering an opportunity to respond or rectify concerns.
The court agreed, ruling that SECP bypassed essential procedural steps. Justice Kayani held that the regulator should have first sought a corrective plan from CSIL and only escalated enforcement if the company failed to comply. The order was declared illegal, and SECP was directed to re-engage with CSIL, allow time for compliance, and resolve any pending appeals within 60 days.
This judgment echoes a similar 2021 decision by Justice Babar Sattar, which nullified SECP’s directive ordering CSIL to wind up its underwriting business within 30 days over alleged solvency issues. CSIL had argued that the SECP Appellate Bench had previously set aside the show-cause notice and adjudication order, affirming the company’s compliance under the Insurance Ordinance 2000. The fresh orders, CSIL contended, amounted to double jeopardy and lacked legal basis.
Representing CSIL, counsel Adam Malik emphasized that SECP had failed to issue prior instructions or a timeline for implementation. Instead, the regulator abruptly demanded cessation of underwriting within 30 days—an action the court found procedurally flawed and legally indefensible.
Justice Sattar’s earlier ruling had already clarified the procedural framework SECP must follow when issuing directives to insurers. Yet, in the recent case, SECP disregarded that precedent and invoked Section 60 in an apparent attempt to sidestep legal constraints. The Islamabad High Court deemed this approach unlawful and declared the order void.
Together, the two judgments highlight a persistent pattern of procedural lapses in SECP’s enforcement strategy. While the regulator raised legitimate concerns about financial risk and compliance, the courts underscored that regulatory action must be lawful, proportionate, and procedurally sound. The rulings also signal the judiciary’s growing insistence on regulatory accountability, especially in sectors requiring technical expertise and oversight.
CSIL’s victories provide the company with a chance to rebuild operations and reinforce market confidence. For SECP, the setbacks present an urgent call for self-examination. Observers note that repeated judicial reversals may erode public trust and investor confidence, underscoring the need for the regulator to adopt more transparent, legally robust enforcement mechanisms.
The defeats raise serious questions about SECP’s internal checks, legal preparedness, and understanding of specialized insurance models. If the regulator is to restore credibility, a fundamental overhaul of enforcement practices is imperative. Moving forward, rebuilding trust will require fairness, legality, and strict adherence to due process in all interactions with insurers.
