Criminal prosecution under the Capital Market Act 2015 needs the Public Prosecutor’s consent and proof beyond reasonable doubt. Part XV gives the Securities Commission a faster route: administrative action decided by the Commission itself. For trustees, fund managers and company directors these are the sanctions most likely to be used.
What counts as a breach and who is caught
A person commits a breach who contravenes the Act or any securities law (other than the takeovers Part), or who fails to comply with the rules of a stock exchange, clearing house or central depository, “any written notice, guidelines issued or condition imposed, by the Commission”, or the rules of a recognised self-regulatory organisation, where the person is under an obligation to comply.
Section 443(2) deems a long list of people to be under that obligation, including the stock exchange and its participating organisations, listed corporations, their directors and officers, advisers on corporate proposals, issuers, directors, promoters and underwriters named in a prospectus, debenture trustees under section 156, unit trust trustees under section 189 and anyone bound by a Commission guideline. Section 466(4) adds that a failure to give effect to a guideline or practice note within the time the Commission specifies lets it take any of the same actions. A trustee that ignores a Commission guideline on fee disclosure is therefore in breach even if no section of the Act itself has been broken.
The actions available
If a breach is established and the Commission is satisfied that action is appropriate in all the circumstances, section 443(3) lets it take any one or more of the following:
- direct the person to comply with the rule, provision, notice, condition or guideline;
- impose a penalty “in proportion to the severity or gravity of the breach”, not exceeding K5 million;
- reprimand the person;
- require steps to remedy the breach or mitigate its effect, including restitution to anyone aggrieved;
- for a breach of the prospectus Part (IV) or takeovers Part (VI), or their guidelines, refuse to accept or consider any submission under those Parts;
- for a promoter or director, impose a moratorium on, or prohibit, trading or dealing in the corporation’s securities or any other securities by that person or persons connected with them; or issue a public statement that, in the Commission’s opinion, the director’s retention of office is prejudicial to the public interest.
In deciding whether to order restitution, the Commission must consider the profits that accrued to the person in breach and whether anyone has suffered loss (section 443(5)). Section 444 applies a similar scheme to derivatives exchanges and clearing houses, with added powers to direct the exchange to suspend, limit or close out derivatives trading.
Licensed persons: up to K10 million
Section 445 deals with holders of a capital market licence. A licensed person breaches the section by contravening the Act, any securities law, a written notice, guideline or licence condition, or by doing or omitting anything in its licensed business “that is likely to jeopardise the interests of the clients of the licensed person or be prejudicial to the public interest”. The available actions are a direction to comply, a penalty of up to K10 million proportionate to the breach, a reprimand and a direction to remedy or mitigate, including restitution. The Commission’s separate power to suspend or revoke the licence under section 48, used against Melanesian Trustee Services Ltd in 2023, is unaffected; see revocation and suspension.
The right to be heard
Sections 443(4), 444(4) and 445(3) each say the Commission “shall not take any action” without giving the person in breach an opportunity to be heard. This is a mandatory precondition, not a formality. In the Pacific Balance Fund litigation the National Court set aside the Commission’s first revocation decision of 9 August 2023 and directed that the trustee be given 30 days to respond before a fresh decision was made, as recorded in Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524. A person facing administrative action should ask for the allegations in writing, the material relied on and a reasonable time to answer.
Enforcement and where the money goes
| Situation | Consequence | Section |
|---|---|---|
| Penalty not paid | Commission may sue for it as a civil debt due to the Commission | 443(7), 445(6) |
| Restitution ordered but not paid | Commission may sue for it as a civil debt due to the aggrieved persons | 443(8), 445(7) |
| Restitution recovered but aggrieved persons cannot be found or notified | Paid to the Capital Market Development Fund, or retained by the Commission for investor education or the cost of regulation | 443(9), 445(8) |
| Direction ignored | Commission may apply to the National Court for an order compelling compliance | 449(1)(b) |
| Defying a direction, order or decision of the Commission | Offence: fine up to K10 million or 10 years, or both | Securities Commission Act, s 96(2) |
Administrative action is additional to, not instead of, prosecution or the stock exchange’s own disciplinary rules (sections 443(6) and 445(5)). A penalty under section 445 is a Commission decision, so it can be taken to the Board for review and then to the National Court; see challenging a decision.
The moratorium and public statement powers in section 443(3)(f) are aimed at individuals. A director of a listed landowner company who signs off a misleading announcement can find himself barred from trading in any securities and publicly named as unfit, without any court finding. The hearing under section 443(4) is the time to contest them.
Sources
- Capital Market Act 2015 — ss 48, 156, 189, 443, 444, 445, 449(1)(b), 466(4)
- Securities Commission Act 2015 — ss 96(2), 111
- Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.