Law: Non-Banking Finance Companies and Notified Entities Regulations, 2008

Section: 66A(c)(i),66A(c)(iv),66A(d),66A(f)

(a)    Non-Banking Finance Companies and Notified Entities Regulations, 2008-------Reglns. 66A(c)(i), 66A(c)(iv), 66A(d) & 66A(f)---Investing in Equity/Mutual Funds---Mis-selling / concealed investment risks, allegation of---Risk categorization of investor---Appellant (Fund Management Company) was penalized by the Securities and Exchange Commission of Pakistan (Commission) on complaint of lady investor (a housewife who had invested an inherited amount) who redeemed the availed plan owing to loss of principal investment allegedly due to contraventions on the part of the Appellant---Validity---To influence the investment decision of investors, it is a practice of the sales agents to highlight the returns without adequately explaining the associated risks and potential downside of equity investment through mutual funds---At the time of making investment respondent (lady complainant), received a welcome call informing her of the risks and exposure involved---Despite that, respondent (complainant) had proceeded with her investment---If respondent (complainant) had been deceived by the appellant's relationship manager / sales staff, she should have made a wise choice after receiving the welcome call and information about the risks associated with investing in equity, as required by the "Caveat Emptor" (buyer beware) doctrine, which holds the respondent (complainant), responsible for her investment decision--Respondent (complainant) also failed to proceed vigilantly---The recorded call log between the representative of appellant and respondent (complainant) mitigates the assertion made by respondent (complainant) regarding mis-selling or concealed investment risks, however, this fact does not completely absolve the appellant--Respondent / complainant is a housewife, therefore, she cannot be considered wellinformed and vigilant Investor who can understand the risk-bearing factors of equity funds ; thus, the appellant had not acted in her best interest and failed to ensure reasonable care regarding the suitability of the investment product offered to her---However, appellant has apprised the Appellate Bench that without admitting the guilt and on…