Islamabad: The Islamabad High Court (IHC) has invalidated the Securities and Exchange Commission of Pakistan’s (SECP) prohibition on Crescent Star Insurance Limited’s (CSIL) guarantee operations, labeling the regulatory body’s move unlawful. This judgment is seen as a major reprimand of the commission’s enforcement practices.
The court determined that the SECP’s December 2024 order, halting CSIL’s guarantee operations, contravened the Insurance Ordinance, 2000. It emphasized that the regulatory authority is obligated to permit an insurer to present a compliance strategy before implementing coercive measures, a protection disregarded in this instance.
The court also observed that CSIL’s guarantee dealings are an acknowledged category of non-life insurance and its utilization of facultative reinsurance was a legitimate business strategy not requiring supplementary reinsurance stipulations.
This verdict underscores that regulators must function within their legal confines; otherwise, they jeopardize the very market trust they are tasked to safeguard, a legal expert commented. This decision has reinforced the belief among some business leaders that the SECP’s investigative and judgmental branches frequently act hastily, neglecting legal prerequisites.
The SECP had charged CSIL with issuing guarantees amounting to Rs229 billion without proper security or reinsurance, claiming misrepresentation after a reinsurance firm refuted any accord. However, the court rejected these assertions, citing procedural errors. Following the verdict, CSIL has recommenced activities and notified the Pakistan Stock Exchange.
Confidential sources indicate this situation necessitates an internal evaluation at the SECP. They cautioned that capricious enforcement choices make Pakistan seem risky for investments, discouraging capital. The harm, they emphasized, is widespread, not isolated. They assert the SECP’s Supervision Division has become a substantial impediment for enterprises and the regulator’s trustworthiness.
Repeated judicial overrulings of its decisions suggest unprofessional behavior and institutional shortcomings. Critical duties should be assigned to competent individuals who respect the law and operate without biases or concealed motivations.
Experts believe this verdict could discourage regulatory overreach but warn that without fundamental changes at the SECP, comparable conflicts will likely reemerge. The incident, they contend, serves as a cautionary tale that in Pakistan’s precarious investment atmosphere, regulatory missteps can be as detrimental as corporate malpractice.
They maintain this situation should compel legislators and higher authorities to enhance supervision of the SECP’s decision-making procedures. Without transparent enforcement and uniform rule application, Pakistan risks further undermining its already delicate investment landscape, deterring both domestic and international capital during a time of economic uncertainty.