1.1 This Code states the core value relating to lawful and ethical conduct of business by every Leasing Company and Modaraba that is a Member (hereinafter called the “Member”) of the Leasing Association of Pakistan (hereinafter called the “LAP”). It applies to every Member of LAP as well as to the management and employees of the Members.

1.2 This Code lays down the basic principles and sets the overall tone of the expected conduct. Members are encouraged to maintain more detailed codes to meet the specific requirements of their individual businesses; but such documents must be consistent with this Code.

1.3 Requirements of laws and regulations, whether expressed in this Code or not, shall, always have precedence.

2. PRINCIPLES GOVERNING BUSINESS CONDUCT

2.1 Members’ individual and collective reputation for legality and ethical values in the conduct of their business is important in commercial and regulatory terms. The following principles should form the cornerstone of the Members’ business policies and dealings:

• Abide by legal and regulatory requirements in letter as well as in spirit.
• Adhere to the highest standards of integrity and fair dealing.
• Adopt professional skill and prudence in all business activities.
• Promote effective risk management in overall business activities.
• Encourage and implement the policy of know your customer.
• To the extent possible adopt compatible business systems to foster ease in assembly and access to universal information systems.
• Employ professionals in key positions and encourage professional development within the organisation.

2.2 The above should be understood at all levels throughout the Members’ organization, so that these principles formulate a behaviour and corporate culture for everyday business. It is, therefore, the responsibility of the Senior Management to practice and inculcate in their colleagues an urge to adopt the Code sincerely.

3. LEGAL DISCIPLINE AND RELATIONSHIP WITH REGULATORS

3.1 The law and ethical values generally coincide. There may, however, be situations where an action may be technically lawful but opposed to the essence of law or ethical business practice. As such, adherence to the letter of the law alone may not always be enough. In such situations, the activities should conform to the essence of law and ethical conduct.

3.2 The Members should follow the laws, rules and regulations and guidelines framed by Securities and Exchange Commission of Pakistan, State Bank of Pakistan, Central Board of Revenue and the listing regulations of the relevant Stock Exchange as amended, revised or modified from time to time under various notifications, laws, SROs consents and charters. In case of any difficulty, the members should act in close co-operation with LAP.

3.3 The Members should operate in particular, their business in accordance with The Companies Ordinance, 1984, The Income Tax Ordinance, 2001, NBFCs Rules, 2003, Prudential Regulation for NBFCs undertaking leasing business and The Leasing Companies (Establishment & Regulations) Rules, 2000 and the listing regulations of the relevant Stock Exchange to assist the members and SECP in the implementation of Code of Corporate Governance by creating suitable environment, by providing training and liaison particularly in the areas of Internal Audit, Risk Management and Corporate Affairs. The Members should not consciously conduct and adopt any mode of business and finance contrary to these Laws and Rules framed there under. The Members should also adhere to the conditions attached to any specific permission for business granted by the relevant authorities. In case of doubt, with respect to the intent, meaning or applicability of the Law or Regulation or otherwise, the Members should refer to LAP, which shall take it up with the relevant authorities for clarification.

3.4 The Members should submit prompt and accurate returns, statements and statistical reports and all relevant data to the Securities and Exchange Commission of Pakistan and State Bank of Pakistan and other concerned authorities in accordance with the formats as prescribed by them.

3.5 To help streamline the reporting requirements and returns by collecting the information from the members and submission to SECP in a consolidated manner, regarding the subjects to be manually determined.

3.6 Members must be open and co-operative with the regulators and keep them fully and promptly informed of everything which should reasonably be disclosed to them. They should fully co-operate with regulators in advance of and during inspections, give candid responses to questions raised and achieve prompt remedy of deficiencies.

3.7 Breaches of the law, regulations or the acceptable business standards are not justified by the pursuit of profit. Nor are such actions acceptable by the market practice. Revenues should be earned by professional enterprise and skill and not by compromising the requirements of law and regulations or at the expense of the Members’ collective reputation.

4. RESPONSIBILITIES TO CO-MEMBERS

4.1 Competition amongst Members is encouraged so long as it does not lead to unethical and unfair business practices, such as soliciting business through undercutting, discrediting or misrepresenting.

4.2 Members must refrain from saying or doing anything to malign other Members publicly or to the clients in any form or manner and also refrain from making unwarranted and false claims in their advertisements.

4.3 Members should promote an atmosphere of congenial relationship amongst the leasing community. They should act in close liaison, co-operating and harmony and to safeguard and protect the interests of one another by exchanging and disseminating information, data and statistics on matters for their mutual benefit.

4.4 In order to encourage goodwill amongst Members and diversify risks, syndication of leases should be encouraged in order to improve risk management.

4.5 On receiving a syndication offer of leasing or financing by a Member from another Member(s), it would be unethical for the former to take away by direct contact with client partial or full business of the syndication offer or to propose any variations of the terms without the full knowledge and agreement of other syndicate members. Before syndicating a large or medium ticket lease, the Members of the lessors syndicate should work in close co-operation in order to obtain the best possible terms for the prospective customer or lessee.

4.6 The Members should subscribe information regularly for updating the Lease Asset Register maintained by LAP. Members should check the subject asset with LAP to avoid duplication of lease.

4.7 As part of the credit appraisal, Members should seek credit referral from fellow Members having an existing relationship with the prospective lessee. Such query and reference should be treated in the strictest of confidence and good faith. A Member becoming aware of a customer’s requirement, due to credit referral by another Member, should not convert this information to his advantage by approaching the client for soliciting business.

4.8 In case of common customers or lessees, the Members concerned may exchange information periodically between themselves about the items financed or leased, the amount involved and all relevant information concerning the said customers or lessees.

4.9 In case of persistent delinquency, non-cooperation or any other acts which impact on the integrity of the client, the details shall in strict confidence be notified to LAP by concerned Members.

5. SERVICE TO CUSTOMERS

5.1 The Members should provide service to the highest-quality within the precepts of good business practices.

5.2 A Member should provide a service to a customer only if it has acquired the necessary regulatory license or authority and possesses the expertise of a high standard to do so.

5.3 Prior to offering a service, Members should seek from its customers all the information which might reasonably be expected to be relevant to the matter, and act in the light of the customer’s financial circumstances and objectives. Letter of offer should only be issued after a decision in principle has been taken to extend the facility.

5.4 If delivering advice to clients, Members should ensure that it is clearly expressed and that any reservations to or qualifications of the advice are fairly presented.

5.5 For the security of both the customers and the Members, the later should always ensure the completeness of the legal proprietary and documentation before a transaction is entered into.

5.6 The Members owe a strict duty of confidentiality to their customers. They cannot disclose to any third party, particulars of the identity or financial, business or personal affairs of a customer, unless:

• disclosure is with the customers prior written consent, or
• disclosure is compelled by a court or statutory authority of competent jurisdiction, or
• disclosure is required by law or by regulatory requirements, or
• disclosure is necessary to protect the rights, interests and assets of the Members.

5.7 The LAP fully supports the international drive against serious crime, especially drug trafficking and terrorism, and is committed to assisting the authorities to identify money laundering transactions and, where appropriate, to confiscate the proceeds of crime. Members should make sure that they are familiar with the obligations imposed by the law and regulatory authorities. The Golden Rules is to “Know Your Customer.”

6. MANAGEMENT AND EMPLOYEE BEHAVIOUR

6.1 The Board of Directors and the Chief Executive have ultimate responsibility for the legality and integrity of the Members’ operations. Therefore, they should ensure that the Code is fully understood and adhered to by all staff.

6.2 Management and staff must ensure that personal interests do not conflict with the duties which they owe to their organisation or which their organisation owes to its customers. In particular, they should never become personally involved in any transaction, negotiation or contract on behalf of their organisation with an entity in which they or their relative or friend has an interest, without full written disclosure to and prior written approval by the head of the organisation concerned.

6.3 Managers and employees may not (whether personally or for a relative) solicit or accept from, or offer to, an existing or prospective customer, counter-party, supplier or contractor any favour, gift, entertainment or other benefit the size or frequency of which exceeds normal business contact. Nothing may by given or received which might distort commercial judgement or harm the Member’s reputation.

6.4 The management and employees of the Members and their spouse and dependent children should never engage in insider trading in securities. This means that they may not deal, or advise or arrange for anyone else to deal, in any shares or other securities listed or traded on a recognized Stock Exchange, if they have information which they know or have reason to believe is non-public price sensitive information relating to those securities or the company concerned. This applies whether they have received the information through their work or from any other source.

6.5 The Members should seek to provide the best possible training to their employees and remunerate them suitably. They should encourage a culture which promotes high professional standards and conduct.

6.6 Employees should endeavour to serve their organisations with loyalty, integrity and competence. They should also vow to operate with the strictest of confidentiality. Employees must at all times offer their full cooperation in performing their duties.

6.7 When recruiting staff, Members should ask for clearance of dues and letter of release from previous employers.

7. ARBITRATION AND NOTIFYING BREACHES

7.1 The Members should refer any dispute among themselves to LAP for consideration, arbitration or settlement and should, in a spirit of brotherhood, accept the mode prescribed by LAP for the settlement of their disputes or misunderstandings, insofar as such decisions of LAP do not impinge upon prescribed legalities or judicial considerations.

7.2 In case of any Members adopts any unethical practice and / or works in violation of this Code of Conduct then other Member(s) having knowledge thereof shall bring such practice or violation to the knowledge of Chairman LAP. The Chairman, if considers that evidence is sufficient and conclusive on receipt of the report of violation shall constitute a committee of Executive Committee Members and based on their recommendations will submit his own recommendation to Executive Committee for taking appropriate action, in strict confidence. In case of unsubstantiated or unfounded information, LAP may take appropriate action against the completing Member(s).

8. GENERAL

8.1 The Members should always abide by the aims and objects and the rules and regulations of LAP, as laid down in its Memorandum & Articles of Association.

8.2 The Member should carry out the instructions and directives issued from time to time by LAP, within the framework of the policy laid down by the Government and all relevant authorities, for the smooth functioning and conduct of business of the Members of LAP.

8.3 The Executive Committee of LAP will have power to propose any additions, amendments or revisions in the Code of Conduct at any time it finds necessary. The Code of Conduct and any changes will be approved by majority of the Members, either in a Meeting or by circulation.