What Orders Can the National Court Make on the Securities Commission’s Application in Papua New Guinea?

When a direction is ignored or money is about to disappear, the Securities Commission does not have to wait for a prosecution. Section 449 of the Capital Market Act 2015 gives it, and in some cases the stock exchange and aggrieved investors, direct access to the National Court for protective and remedial orders.

When the Court may act

“Relevant requirement” is defined in section 449(13). For the Commission it covers any requirement imposed by the Act or any securities law, by a licence or approval condition, by the rules of a stock exchange, derivatives exchange or clearing house, or by any other law whose breach the Commission may prosecute with the Public Prosecutor’s consent. A stock exchange or clearing house may apply over breaches of its own rules, and any person aggrieved by another’s contravention may apply as well (section 449(1)(c) and (d)).

The orders available

Section 449(1)(e) to (t) lists the orders. The Court may:

• restrain or require the cessation of a contravention, and restrain a person from dealing in securities or derivatives of a stated class;
• restrain a person from acquiring, disposing of or dealing with assets the Court is satisfied he is reasonably likely to dispose of;
• direct a person to dispose of specified securities, or restrain the exercise of voting or other rights attached to them;
• appoint a receiver of the property of a capital market licence holder, including property held on trust for others;
• vest specified securities or property in the Commission or a Court-appointed trustee;
• require a person who refuses to do something a relevant requirement demands to do it, and give directions to a body corporate and its directors about compliance with exchange rules;
• remove a chief executive or director from office, or bar him from managing any other public company for a period the Court fixes;
• require the person, or anyone knowingly involved, to remedy or mitigate the contravention, including by restitution;
• order compliance with a Commission direction, and make any ancillary order.

The Court may rescind, vary or suspend any order (section 449(12)).

Interim orders and no undertaking as to damages

Section 449(2) lets the Court, before considering the application, make an interim order of the kind applied for, pending determination. Two features depart from ordinary injunction practice. First, where the applicant is the Commission, a stock exchange, a derivatives exchange or a clearing house, the Court “shall not, as a condition of the grant of the order, require any undertaking as to damages” (section 449(5)); a private applicant gets no such exemption. Second, a mandatory order may be granted even without any imminent risk of damage (section 449(4)).

Receivers, vesting and payment into Court

A Court-appointed receiver may require the licensee to deliver the property and all information about it, take possession of it and deal with it as the licensee lawfully could, with any further powers the Court specifies (section 449(6)). Where securities are vested in the Commission or a trustee, that body may demand delivery and information, take possession and deal with them as it thinks fit (section 449(8)); the proceeds of any disposal must be paid into Court, and anyone claiming a beneficial entitlement has 30 days to apply for payment out (section 449(9)). Contravening an order or a receiver’s requirement is an offence punishable by a fine of up to K10 million or ten years’ imprisonment, or both (section 449(10)).

Section 450 adds the ultimate remedy. Notwithstanding the Companies Act 1997, a company that falls within section 449(1) may be wound up by the Court on the petition of the Commission, a stock exchange, a derivatives exchange or a clearing house, where it held a licence that has been revoked or surrendered or has contravened exchange rules or a securities law. See court-ordered winding up.

Powers under the Securities Commission Act

Three provisions of the Securities Commission Act 2015 also let the Commission go to the National Court. Section 101 lets it sue, on behalf of a unit holder, investor or beneficiary, to recover assets, securities or their value from an issuer, promoter, trustee, manager or anyone dealing in securities. Section 84 lets it, with the person’s written consent, begin and carry on proceedings in that person’s own name to recover damages for fraud, negligence, breach of duty or other misconduct uncovered by an investigation or examination, or to recover property. Section 98 lets it bring civil or criminal proceedings where a person has failed without reasonable excuse to comply with any requirement of Part V.