Can Securities Offences Be Compounded or Settled in PNG?

Not every breach of the securities laws ends in the National Court. A licensed trustee that lodged its audited accounts two months late, or a listed company that missed a disclosure deadline, has technically committed an offence carrying ten years’ imprisonment. The Capital Market Act 2015 and the Securities Commission Act 2015 give the Securities Commission several ways to resolve such cases short of a trial.

Compounding under section 462

The suspect pays an agreed sum and the matter ends. Four features of section 462 matter in practice:

• Who decides. The power is given to the Chairman personally, not to the Commission or its chief executive. After the 2023 amendment to the Securities Commission Act the Commission is run day to day by a chief executive officer, but section 462 still names the Chairman, and until it is amended the Chairman must make the decision.
• Any offence. The section is not limited to minor breaches. In principle even insider trading could be compounded, though the ceiling is the maximum fine, which for most offences is K10,000,000.
• Suspicion is enough. The person need only be “reasonably suspected”; there is no conviction and no admission of guilt is recorded in a court.
• Finality. Under section 462(2), once the money is paid “no further proceedings shall be taken against such person in respect of such offence”, and books or other things seized may be released, subject to conditions in the compound.

Section 462(3) directs that all compounding money is paid into the Commission’s Fund established by section 43 of the Securities Commission Act, so it funds the regulator rather than the State generally. Compounding is not without consequence for the individual: section 378(3)(c) lists having “been compounded for an offence under Section 462” among the matters that can lead the Commission to seek the removal of a director of a listed corporation. See directors’ liability.

The repealed Securities Commission Act power

Section 105 of the Securities Commission Act originally gave the Chairman a parallel power to compound offences under all three securities Acts for “such amount as may be prescribed”. The Securities Commission (Amendment) Act 2023 repealed section 105. Compounding therefore now rests on section 462 of the Capital Market Act for Capital Market Act offences and on section 68 of the Central Depositories Act 2015 for depository offences. Offences under the Securities Commission Act itself, such as refusing to answer the Commission’s questions, no longer appear to be compoundable, and must be prosecuted or dealt with by the other means below.

Enforceable undertakings: SC Act section 92

Section 92 of the Securities Commission Act allows the Commission to accept a written undertaking from a person “in connection with a matter in relation to which the Commission has a function or power”. The person may withdraw or vary it only with the Commission’s consent. If the Commission considers the undertaking breached it may apply to the National Court, which can order compliance, payment to the Commission of any financial benefit attributable to the breach, compensation to anyone who suffered loss, and any other appropriate order. A trustee that has been late with its accounts might undertake to appoint a compliance officer and report quarterly, avoiding both prosecution and a formal penalty.

Administrative penalties and restitution

Section 443 of the Capital Market Act lets the Commission, after a hearing, direct compliance, reprimand, impose a penalty of up to K5,000,000 and require steps to remedy the breach “including making restitution to any other person aggrieved” (section 443(3)). For licensed persons section 445 raises the ceiling to K10,000,000. These are not criminal proceedings and need no consent from the Public Prosecutor. Section 443(6) preserves the Commission’s right to take other action as well, so an administrative penalty does not by itself bar prosecution. See administrative penalties.

Civil penalties instead of prosecution

For market misconduct the Commission may sue in the National Court under section 324 (and sections 325 and 335) for up to three times the gain and a civil penalty of up to K10,000,000, “whether or not that person has been charged with an offence”. The civil standard of proof applies, and recoveries go to costs and then to victims. See recovering losses.

Prosecution and the Public Prosecutor

Section 464 provides that no prosecution for an offence under the Capital Market Act may be instituted without the written consent of the Public Prosecutor, who may authorise officers to conduct the case. Section 102 of the Securities Commission Act likewise lets the Commission prosecute offences under that Act with the Public Prosecutor’s consent. Under section 107 of that Act all securities offences are indictable. The Acts say nothing about plea bargaining; any negotiated outcome once a prosecution has begun is a matter for the Public Prosecutor under the general criminal law.