LAHORE: The Lahore High Court has annulled penalties imposed by the Securities and Exchange Commission of Pakistan (SECP) on the directors of a weaving mill for a delayed filing of beneficial ownership statements.

Justice Jawad Hassan allowed seven connected commercial appeals, including the one by Fawad Ahmed Mukhtar, the company’s chairman and also the head of the Fatima Group.

The SECP had fined each director Rs60,000 under the Securities Act, 2015, for a 253-day delay in filing Form 5 after their re-appointment.

Section 103 of the Act, read with Regulation 3(4) of the 2015 Regulations, requires directors of listed companies to file the form within seven days.

The appellate bench of the SECP later halved the penalty to Rs30,000 each and the SECP issued a recovery notice to the appellants.

The directors argued that the delay was inadvertent and caused by the Covid-19 disruptions and administrative difficulties.

They said their re-appointment involved no change in shareholding, beneficial ownership or position. They also noted that the forms were filed on Dec 31, 2021, after an SECP letter of Dec 23 but before any show-cause notice was issued.

The SECP’s special prosecutor objected to the maintainability of the appeals and stressed that disclosure rules protect investors and market confidence.

However, the judge rejected the objection.

Justice Hassan acknowledged that the reporting requirement is mandatory and cannot be treated as optional, even for family-owned companies.

He observed, however, that the disclosure regime aims at actual disclosure of relevant interests rather than formal filing alone.

He noted the forms were filed before adjudication began and the SECP itself had accepted there was no concealment or misrepresentation, therefore, the regulatory purpose had in substance been achieved.

The judge also noted that an SECP clarification of April 20, 2022, indicated ambiguity over whether Form 5 applied to re-appointment of the same directors.

He held that reducing the penalty did not answer the question of whether any penalty was justified.

The judge referred to the principles for regulators dealing with listed companies, including proportionate penalties, due process, protection against arbitrary enforcement and effective judicial review.

He ruled that disproportionate sanctions can damage shareholder value and market confidence.

The judge allowed the appeals and set aside the orders of the SECP and its appellate bench.

Published in Dawn, October 23rd, 2026