Karachi September 17 2022: Security and Exchange Commission of Pakistan fined Worldcall Telecom Limited for not timely disseminating price sensitive information to the exchange.
The case was related to the Karachi based operations of the Worldcall Telecom Limited company which were handed over to NETSAT on the basis of the Agreement but not disclosed to the exchange timely.
Share price of the company went up from PKR 1.64 on the initiation date of the agreement to a high of PKR 4.23, which is 2.6 times higher, before coming down to PKR 3.19 on date of notice to the exchange.
Therefore, a penalty of Rs. 500,000/- (Rupees Five Hundred Thousand only) is hereby imposed on the Worldcall Telecom Limited Company i.e. Worldcall Telecom Limited by SECP.
Worldcall Telecom Limited, during the hearing proceedings, contended that the Authorized Officer does not has power to conduct adjudication proceedings under Section 159 (5) of the Act. In this regard, it is stated that the Commission has delegated its powers under Section 159(5) of the Act vide SRO No. 232(1)2020 dated March 16, 2020 and therefore, the undersigned has the power to enforce relevant provisions of Section 159(5) of the Act. Therefore, the contention of the Worldcall Telecom Limited in this regard is not tenable.
The Worldcall Telecom Limited also contended that reference for price sensitive information may be drawn from regulation 5.6.1 of the PSX Rule Book and as such PSX is the frontline regulator to enforce the provisions of the Rule Book. The Worldcall Telecom Limited argued that the Commission may not exercise concurrent jurisdiction whereas, PSX has already taken cognizance and concluded the matter with regard to submission made by the Company.
In regard it is stated that the SCN has been served under Section 96 of the Act which is administered by the Commission, therefore, the question of concurrent jurisdiction doesn't arise as the Commission is under obligation to take cognizance of the offenses pertaining to the Act. It is also stated that, no enforcement action was initiated against the Company by PSX in the matter asthe same was taken up by the Commission.
The Worldcall Telecom Limited, also contended that the Commission took cognizance of the matter solely based on the communication received from NETSAT.
In this regard. it is stated that relevant department of the Commission vide letter dated May 27, 2021 requested the Company to explain its stance as to why the said material information was not shared with PSX and general public in terms of Section 96 of the Act. The Company provided its response vide letter dated June 08, 2021 which was scrutinized by the said relevant department. Clarification of the Company in the matter was also sought vide letter dated July 02, 2021 and all the relevant correspondence was duly considered by the relevant department subsequent to which the adjudication proceedings were Initiated by the Commission. therefore, the contention of the Worldcall Telecom Limited that the SCN was served solely on the basis of unilateral communication is not tenable.
The Worldcall Telecom Limited, based on the merits of the case, contended that the agreement dated February 23, 20221 in question was not finalized at that time and was disputed in the nature. The Worldcall Telecom Limited provided evidences of emails exchanged between the Company and NETSAT wherein multiple disagreements were highlighted regarding the terms of the agreement. The Worldcall Telecom Limited provided that subsequent to successful negotiations, final agreement was executed between the parties on September 20, 2021 and the Company accordingly disclosed the fact through an announcement dated September 23, 2021 as required under the PSX Rulebook.
In this regard, it was observed that the agreement dated February 23, 2021 signed by both parties and majority of the terms and conditions were agreed between the parties, in continuation of which a payment of PKR 50 million was also made to the Worldcall Telecom Limited Company by NETSAT. Further, the Karachi based operations of the Worldcall Telecom Limited company were also handed over to NETSAT on the basis of the Agreement i.e. the agreement Signed on February 23, 2021. Based on the occurrence of these two significant events, the aforesaid plea of the Worldcall Telecom Limited cannot be agreed to. I am of the considered view that the Worldcall Telecom Limited was liable to disclose the same, being material and price sensitive, along with the caveat that certain terms and conditions are disputed.
With regard to the agreement dated February 23, 2021 in question, it is important to mention that a payment of Rs. 50 million was released by NETSAT to the Worldcall Telecom Limited. The Worldcall Telecom Limited has stated the Agreement signed on February 23 2012 was a "disputed document" between the two parties, and therefore the information was not disseminated to the public.
In this regard, It is stated that the said Agreement was signed by CEOs Of both parties, an amount of Rs.50 million was paid to the Worldcall Telecom Limited Company, and Karachi based operations of the Worldcall Telecom Limited Company were handed over to NETSAT. Keeping in view all the aforesaid three significant events, reliance cannot be placed upon unilateral stance of the Worldcall Telecom Limited that the Agreement was a "disputed Document” … The Worldcall Telecom Limited submitted copies of correspondence/ emails exchanged between the company and NETSAT which transpires that certain changes/ amendments needed to be made in the term of the agreement and the terms were finally agreed upon later in September, 2021. However, keeping in view the materiality of partnership between the two parties, payment of significant amount of Rs. 50 million, and handing over of Karachi based operations of the Worldcall Telecom Limited to NETSAT, the information based on the agreement dated February 23, 2012 must have been disclosed to public as per the requirement of the Section 96 of the Act.
Section 96 of the Act requires a Listed company to disclose material/ price-sensitive information relating to the companies or Its subsidiaries which would be material to an investor's investment decision making regardless of its effect on the price of securities. It may be noted that the Company itself has disclosed the said agreement in September, 2021 keeping in view the material/ price-sensitive nature of the information. However, the Company has failed to disclose the said information upon signing the Agreement on February 23, 2021 which is contravention of Section 96 of the Act.
Therefore, in terms of the powers conferred under Section 159 (5) of the 'Act, a penalty of Rs. 500,000/- (Rupees Five Hundred Thousand only) is hereby imposed on the Worldcall Telecom Limited Company i.e. Worldcall Telecom Limited.