The Securities Commission’s powers are scattered across two Acts. The Securities Commission Act 2015 gives it general and institutional powers; the Capital Market Act 2015 gives it specific powers over licensees, schemes, markets and misconduct. This article covers the general powers; investigations, examinations, searches, inquiries and penalties have their own articles.
The general power and rule-making
“Without limiting and notwithstanding any other provision of any other Act, the Commission shall have all such powers as are reasonably necessary or expedient to enable it to carry out its functions and duties and to enable it to achieve its objectives.”
Section 38(2), as amended in 2023, spells out the main heads: issuing rules, guidelines, notifications, directives, class orders and orders; determining fees for applications, approvals and licence renewals; and making rules for the Commission’s own staff and committees. Rules and guidelines of general application come into force when published in the National Gazette, but orders, notifications, directions and exemptions do not need gazettal (section 38(3)). Two further subsections matter to anyone facing enforcement: actions under Part V (investigations and proceedings) must be brought within 12 years of the offence, and the Frauds and Limitations Act 1988 does not cut that period down (section 38(6) and (7)).
Under the Capital Market Act, section 466 lets the Commission issue guidelines and practice notes on any provision, which bind the persons to whom they apply; failure to follow them exposes a person to the administrative actions in sections 443 to 445. Section 470 goes further: by order in the Gazette the Commission may vary, delete or add to any Schedule of the Act, including the schedules listing regulated activities and excluded offers, having regard to the public interest.
Exemptions
Section 39 of the Securities Commission Act is unusually wide. The Commission may, “in its discretion and upon such terms and conditions (if any) as it thinks appropriate”, exempt any person or class of persons from any provision of the Securities Commission Act, the Capital Market Act or the Central Depositories Act 2015. Section 274 of the Capital Market Act adds a specific power to exempt a person from, or modify, any provision of Part V, the unit trust Part, by written and gazetted exemption or declaration; conditions attached to an exemption are enforceable by court order on the Commission’s application. These exemptions are what allow, for example, a wholesale fund offered only to superannuation funds to operate without a retail prospectus. See exemptions for schemes.
Getting information and freezing accounts
Section 40 is the sharpest of the general powers. In the course of its regulatory functions the Commission may direct a bank or financial institution to freeze the accounts of any person or entity and to provide account statements, transaction records and any other information it requires. A bank that refuses commits an offence punishable by a fine of up to K10 million; a person who refuses to comply with a direction is guilty of wilfully obstructing the Commission, with a fine of up to K5 million or seven years’ imprisonment, or both. The freezing of the Pacific Balance Fund’s accounts after the Commission restricted its trustee in 2018 led to Australia and New Zealand Banking Group (PNG) Ltd v Melanesian Trustee Services Ltd [2019] PGNC 100; N7805, discussed later in this series.
Section 196 of the Capital Market Act lets the Commission carry out surveillance checks on whether a trustee is complying with its trust deed and the Act, and the trustee and its staff must assist; a trustee that fails to comply with the deed or the Act commits an offence for which every director faces a fine of up to K1 million or five years’ imprisonment. Section 42 lets the Commission inquire into any purchase or sale of securities by a licence applicant, or its directors and senior managers, in the 12 months before the application, or by a licensed person at any time, to see whether dishonest, unfair or unethical practices were used.
Systemic risk directives
Part VIII of the Capital Market Act (sections 336 to 339) deals with “systemic risk in the capital market”, defined as financial distress in a significant market participant, an impairment of the orderly functioning of the market or an erosion of public confidence in its integrity. The Commission may require any person to supply information for the purpose of monitoring that risk, including at the request of the Bank of Papua New Guinea (section 337), and may issue a written directive requiring any person to take measures it considers necessary (section 338). The person must be heard first unless delay would aggravate the risk, in which case the hearing follows the directive. Breach of either a notice or a directive carries a fine of up to K10 million or ten years’ imprisonment, or both. Section 339 authorises information sharing with other supervisory authorities.
Case stated and cooperation agreements
Section 41 lets the Commission, at any time, state a case for the opinion of the National Court on a question of law arising in a matter before it; the Court answers and remits the case. Section 42 lets the Commission enter agreements with other regulators in Papua New Guinea or abroad on joint investigations, reciprocal enforcement, joint prosecutions, information sharing and institutional strengthening. These agreements are expressly not legally binding on the Commission, which may withdraw at any time (section 42(3)).
The Act as printed is not the whole law. Gazetted rules, guidelines, class orders and schedule amendments form part of it (Capital Market Act, section 2(2)), and a class order can change who needs a licence or a prospectus. Ask the Commission what instruments apply before relying on a section.
Sources
- Securities Commission Act 2015 — ss 38 (as amended 2023), 39, 40, 41, 42
- Capital Market Act 2015 — ss 2(2), 42, 196, 274, 336–339, 466, 470
- Central Depositories Act 2015
- Australia and New Zealand Banking Group (PNG) Ltd v Melanesian Trustee Services Ltd [2019] PGNC 100; N7805
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.