How Does the Securities Commission of Papua New Guinea Investigate?

Investigation is the Securities Commission’s core enforcement tool. For a unit holder who suspects a trustee has helped itself to scheme money, or a director visited by an Investigating Officer, Part V, Division 1 of the Securities Commission Act 2015 sets out what can happen and what cannot.

When the Commission may investigate

The threshold is low: “reason to suspect”, not reasonable belief or evidence. Section 54(2) adds a second trigger, where the Commission believes “unacceptable circumstances, including prudent corporate governance” may have occurred. The paragraph lettering of section 54(1) is garbled, but the intent is a wide mandate to look into anything touching securities, schemes or corporate conduct.

Investigating Officers and their powers

Section 55, as amended in 2023, lets the Commission appoint Investigating Officers to investigate offences under all three securities Acts and any other Act it enforces. Section 56 gives an officer carrying out an investigation or inspection power, without a search warrant, to:

• enter any place or building and inspect, copy or take extracts from any book, minutes, register or document (section 56(1)(a));
• where the officer believes an offence against a securities law has been committed, search for, seize and detain any object, document or thing that may be evidence, “including any travel or other personal document” (section 56(1)(b));
• search any person believed to be carrying such material, and seize what is found (section 56(2) and (3));
• by written notice require any person to produce books, accounts, registers, electronic storage devices or travel documents in their custody or control, and detain them for as long as the officer considers necessary (section 56(4) and (5)).

Failing to produce documents, assaulting, obstructing or delaying an officer, refusing access to premises or rescuing seized items is an offence carrying a fine of up to K5 million or seven years’ imprisonment, or both (section 56(6)). On warrantless entry, section 61 warrants and travel documents, see searches and passports.

What happens to seized property

Sections 57 to 59 impose discipline on seizure. The officer must record and sign a list of everything seized and where it was found, the occupier may attend the inspection and may demand a copy of the list (section 57). Property must be released at the end of the investigation or proceedings to the person lawfully entitled unless it is needed for a prosecution; if entitlement is disputed the officer refers the question to a Magistrate (section 57(3) to (5)). The Magistrate may order delivery, sale of perishable or low-value items, or detention by the Commission (section 58). Unclaimed property vests in the Commission six months after a public notice calling for claims (section 59). Destroying, concealing, altering or sending abroad records required under Part V with intent to defraud or obstruct is an offence punishable by up to K10 million or ten years’ imprisonment, or both (section 63).

The final report and who sees it

At the end of every investigation the Commission must prepare a final report setting out its findings, the evidence on which they rest and any other relevant matters (section 65). Where the report discloses a serious breach of other laws, a copy may go to the Royal Papua New Guinea Constabulary, the Public Prosecutor, the Internal Revenue Commission, the Customs Service, the Ombudsman Commission or another law enforcement agency. Otherwise the report is not to be published except in exceptional circumstances (section 65(4)). The Commission may use the material to prosecute or bring civil proceedings (section 65(5)). Section 64 protects scheme confidentiality: the Commission may not hand a copy of a registered scheme’s books to another person or agency unless that person needs it for an investigation.

Two follow-up powers sit in Division 6. Where a person is convicted or a judgment is given against them following an investigation, the Commission may order them to pay all or part of the expenses of the investigation, including staff time, recoverable as a debt (section 91). And the Commission may accept a written enforceable undertaking from a person in connection with any matter within its functions; if the undertaking is broken the National Court may order compliance, repayment of any benefit obtained and compensation to anyone who suffered loss (section 92).

An example: the Pacific Balance Fund review

In 2018 the Commission reviewed the affairs of the Pacific Balance Fund and its trustee, Melanesian Trustee Services Ltd, and imposed restrictions under section 48(6) of the Capital Market Act. A 2019 Gazette notice reported that the review had found the trustee insolvent since 2014 and that it had paid itself significant fees. The findings resurfaced in the Commission’s letter of revocation of 9 August 2023, which, as recorded in Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524, alleged excessive fees, poor performance and weak governance. The trustee denied wrongdoing and appealed. The episode shows the path from investigation to administrative action to court.