Islamabad: The Securities and Exchange Commission of Pakistan (SECP) issued a warning to Mr. Faraz Mubeen Jumani, Chief Executive Officer of Khairpur Sugar Mills Limited, for failing to disclose the acquisition of voting shares as required under Section 109(2) of the Securities Act, 2015. The order, issued by Shahzad Afzal Khan, Director and Head of the Adjudication Department-I, concluded proceedings initiated against Mr. Jumani following a Show Cause Notice dated February 22, 2024.

The SECP’s order addressed a share acquisition by Mr. Jumani, who, on January 9, 2024, received 484,200 voting shares in the company through a gift from his father, Mr. Muhammad Mubeen Jumani. This transaction increased Mr. Jumani’s shareholding from 9.99% to 13.01%, surpassing the 10% threshold that necessitates disclosure under the Securities Act.

The transaction was exempt from certain regulations as it was an inter se transfer among relatives, yet Mr. Jumani was still obligated to disclose the acquisition to the Target Company, the Securities Exchange, and the SECP within two working days. According to information available from the Pakistan Stock Exchange (PSX), no such disclosure was made until March 14, 2024, approximately 70 days after the acquisition and subsequent to the issuance of the Show Cause Notice.

During a hearing on April 18, 2024, Mr. Jumani’s representative, Mr. Ali Lakhani, acknowledged the non-compliance, attributing it to a misunderstanding of the law. Despite this admission and the delayed submission of the required documents, the SECP emphasized the responsibility to adhere to disclosure requirements, irrespective of the nature of the transaction.

The SECP’s decision to issue a warning instead of imposing a penalty took into account the non-willful nature of the oversight, the subsequent compliance, and the family-controlled structure of the business, which mitigated the impact on other stakeholders. Nonetheless, the Commission highlighted the importance of compliance with disclosure obligations to maintain transparency and regulatory integrity.

The SECP order serves as a cautionary reminder to corporate executives about the critical importance of timely disclosures, even in cases of exempt transactions, to ensure adherence to the Securities Act and protect shareholder interests.