ISLAMABAD
The Securities and Exchange Commission of Pakistan (SECP) has suffered two legal setbacks as the Islamabad High Court declared its actions against an insurance company unlawful, exposing flaws in the regulator’s enforcement and procedural oversight.
Justice Mohsin Akhtar Kayani set aside SECP’s order barring Crescent Star Insurance Limited (CSIL) from issuing new guarantees or rolling over existing ones, imposed over alleged lapses in reinsurance. CSIL explained that its operations rely on facultative reinsurance, a case-by-case arrangement distinct from treaty-based insurance, which does not trigger the same reporting obligations.
The court ruled SECP acted prematurely, bypassing procedural requirements, and should have allowed CSIL to submit a corrective plan before taking enforcement action. This judgment echoes a 2021 ruling by Justice Babar Sattar, which nullified SECP orders requiring CSIL to halt underwriting over solvency concerns. CSIL’s counsel, Adam Malik, criticized SECP for abruptly halting business, calling the orders legally indefensible and procedurally flawed.
The court agreed, setting aside SECP’s order. Legal experts say the cases highlight persistent weaknesses in SECP’s internal checks, legal preparedness, and understanding of regulatory rules. While the regulator flagged risks and compliance issues, the courts emphasized that enforcement must remain lawful, measured, and procedurally sound.
CSIL’s victories now give it space to rebuild operations and reinforce its market position, with the potential to restore client and investor confidence.
Observers note that repeated judicial reversals may erode broader trust in SECP, underscoring the need for the regulator to adopt more transparent, legally robust enforcement mechanisms. The rulings serve as a reminder that regulatory authorities must balance risk oversight with procedural fairness to ensure market stability and prevent undue disruption.
