SECP says will not succumb to pressure of broker mafia

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KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has categorically stated that the regulator will not bow to the pressure of powerful brokerage mafia and will continue to take corrective measures to eliminate market manipulation. The SECP also discarded the attempts in media to malign the apex regulator by some of the brokers against which the SECP has recently proposed action for their involvement in market manipulation practices. Recently, the SECP has initiated various actions against large brokerage houses on account of security market frauds and market manipulation, as well as finalisation of long-standing proposed prosecutions against brokers and some large business groups.

It is pertinent to mention here that there have been consistent attempts to pressurise the senior management of the SECP into not taking action. The situation has intensified since the announcement on December 14, 2012 of the initiative by the SECP chairman to conduct 100 percent on site inspection of all brokerage houses. Litigation attempting to derail the efforts of the SECP has also increased, and every effort is being made to halt enquiries and investigations and impending prosecutions.
Interestingly, a lot of pressure is being mounted by a major media group in an effort to stop the SECP from giving effect to a decision to initiate prosecution against a large group in the regulated sector of the SECP, which has been involved in manipulation worth millions, ever since this decision has become public knowledge. A full-blown media campaign has been initiated against the senior management of the SECP in an effort to malign and discredit them and to delay filing of prosecution.

As part of this propaganda, a news item was published in prominent newspapers alleging that the SECP chairman had undisclosed business with regulatees of the SECP. In 2005, Muhammad Ali was a 15 percent stakeholder in RI Enterprises, a partnership firm, which he sold on April 4, 2006 through an agreement for sale. Further, he gave a power of attorney to the buyer, specifically substituting him as a partner in his place, and authorising him to do all acts necessary to give effect to the transfer of his interest in the partnership since he was leaving the country at that point in time. Effectively therefore, he severed all ties with the partnership on April 4, 2006, and the authorisation and the agreement to sell clearly evidence this fact. Ali is the first chairman ever of the SECP who has declared all his interests in the annual report of the commission for the years 2010-2011 and 2011-2012.
Section 16 of the SECP Act requires the commissioners and chairman of the SECP to disclose all interests, which can reasonably be regarded as giving rise to a conflict of interest in the performance of their duties, or in any way result in a possible bias in their decision-making. Ali had no interest in RI Enterprises, as he had sold his stake more than four years before being appointed as SECP chairman, therefore, neither did this interest exist at the time of his appointment as SECP chairman, nor was it a requirement of the law since partnerships are not regulated by the SECP and the question of conflict in decision making cannot and does not arise.
It is also clarified that the SECP is not statutorily mandated to administer tax matters, as those clearly fall within the statutory domain of the FBR, therefore the non-prosecution or otherwise for offences pertaining to tax evasion cannot be ascribed to the SECP administration.

When this issue was raised by Mansoor Ahmad Janjua with the SECP, a detailed response was provided to him in writing and he was invited to inspect all the relevant documents and satisfy himself about the factual position. However, he elected not to do so, and continued to send defamatory emails to officials of the SECP threatening litigation as a pre-emptive measure against his non-compliance with the investigation initiated against Muhammad Ahmad Nadeem Securities Pvt Limited by the SECP on July 31, 2012.
Janjua was the company’s secretary of this brokerage house at the relevant time, which has been investigated for misappropriating clients’ shares in violation of the Central Depository Act, 1997. During the course of the investigation, information was sought from Janjua through notice under Section 32 of the SECP Act, 1997, for provision of record and call for examination. Despite service, Janjua failed to comply with the notice, for which prosecution has been filed against him on March 8, 2013. Failure to comply with notice under Section 32 is punishable with imprisonment for a term of up to one year.


Courtesy: Daily Times

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