SECP initiates action over SE Fruits IPO disclosures, calls for stronger audit oversight

• SECP flagged material discrepancies in the company’s IPO prospectus and is reviewing procedural irregularities.
• SE Fruits voluntarily withdrew its IPO, with investors receiving refunds of their subscription money.
• The regulator called for stronger inspection and enforcement powers for the Audit Oversight Board.

The Securities and Exchange Commission of Pakistan (SECP) said on Friday it was initiating regulatory action over material discrepancies identified in the initial public offering prospectus of SE Fruits and Vegetable Limited.

The regulator said the disclosures in question were based on information contained in the company’s audited financial statements. It is reviewing the IPO process to establish responsibility for procedural irregularities, with action to follow wherever violations are established.

SE Fruits and Vegetable Limited, which operates in the fresh fruit and vegetable business, received SECP approval last month to issue, circulate and publish a prospectus for an offering of 30 million ordinary shares.

However, the Commission subsequently suspended further proceedings following the bookbuilding process to protect investors. The company then voluntarily withdrew the offering, intending to submit a fresh application at a later stage with enhanced disclosures. According to the SECP, investors have been refunded their subscription money.

The case has also prompted the regulator to call for stronger oversight of the audit profession. The Commission said reliable audits and accurate financial statements underpin fair share valuations, sound lending decisions and correct tax assessments. Misleading accounts can expose investors and lenders to losses while also affecting government revenue.

The SECP said the matter highlighted the need to strengthen the Audit Oversight Board (AOB) and align its legal framework with international practices and the principles of the International Forum of Independent Audit Regulators (IFIAR).

It described auditors as gatekeepers of financial integrity and said effective accountability required the AOB to have sufficient inspection and enforcement powers, qualified technical staff and stable funding.

Explaining the IPO approval process, the Commission said companies seeking to raise money from the public must disclose their financial position, business plans and associated risks in a prospectus, allowing investors to make informed decisions.

The company is responsible for preparing accurate financial records and complete business disclosures, while an external auditor audits its financial statements. The consultant to the issue then conducts due diligence, prepares the draft prospectus and submits the applications to the Pakistan Stock Exchange (PSX).

The PSX listing committee reviews the applications, and public comments are sought on the draft prospectus. The company and its consultant must address observations, revise disclosures where required and submit a due diligence certificate to ensure investors receive complete and transparent information.

The PSX decides on the listing application, after which the SECP makes its decision on the prospectus. Once approval is granted, the company publishes the approved document on PRIDE, the Public Offerings Revolutionised through an Integrated and Digitised Experience platform, before bookbuilding begins.

The Commission noted that fraudulently inducing securities transactions and making false or misleading statements constitute criminal offences under Sections 134 and 136 of the Securities Act, 2015.