Securities and Exchange Commission of Pakistan (SECP) Dr
Tariq Hasan has said that March-like crisis at stock
market would not be repeated again.
He said that
the SECP has put in place a number of measures to
stabilise the stock market, eliminate market abuse and
give protection to investors, especially small ones.
interview, the SECP Chairman said that the stock market
is gradually inching forward due to better corporate
profitability, continued strong growth in the national
economy and measures taken by the SECP to stabilise
market. He also said the commission is shortly
initiating a full-fledged move against white-collar
crimes at capital market.
Which way the stock
market is moving these days?
Stock market is showing stability steadily these days.
The corporate profitability, continued impressive growth
in the country's economy and protection measures
introduced by SECP have ensured a gradual but steady
growth in the stock market.
Will SECP ask NAB to
investigate stock market crash?
If you talk about March crisis at stock market, it was
hardly a crash. The entire market remained open unlike
the situation we had in 2001-02 when the stock market
trading had to be suspended for a few days amid default
by some people. In contrast this time there was Rs 13
billion settlement in one day which prevented default
and kept smooth market activity. So I think it could not
be called a crash. In addition, we also took decisions
to ensure that stability in the market is maintained.
There was certainly a downturn in market and a lot of
investors suffered. We immediately set up a complaint
cell which received 150 complaints of which 50 could not
be authenticated, 50 decided, while 40 complaints are
being attended by the SECP. NAB had nothing to do with
this issue. NAB had its own jurisdiction and law. NAB is
an accountability bureau and it is not just a financial
crime wing. NAB has its own mandate and if any issue
falls into it ambit, NAB officials should investigate
investigated the illegal forex brokerages issue so could
this matter also be referred to the Bureau.
issue of unlawful forex brokerage companies was in the
purview of the NAB as a result the Bureau involved
itself in it. But the stock market crisis did not fall
in the jurisdiction of the NAB as the situation was
entirely different. Neither SECP had asked the NAB to
take up stock market case nor the Bureau had evinced any
interest in it, because a lengthy forensic research and
investigation is required to get solid evidence of stock
Q: There are
speculations that SECP is taking action against brokers
involved in the crisis?
SECP will continue to take action against the brokers
that violate law and found guilty of market abuse. It is
the prime duty of the SECP to protect the interests of
investors and eliminate abuses from the stock market.
continue to hurt stock market. How SECP is tackling this
It is extremely difficult to trace the origin of the
speculations. It is a common phenomenon all over the
world. SECP and stock markets are educating investors
about risk factors, including speculative trading.
Q: There are
reports that the margin financing is not available at
I have heard about it. I really don't understand as to
who is saying that and why because whenever we take up
this issue with the State Bank officials, they say that
the banks are providing margin financing to the
brokerages. Various banks have committed 18 billion
rupees for margin financing and if it is not being
picked by the brokers on one or the other pretexts it
does not mean the financing is not available. We have
introduced very liberal margin financing scheme and the
SBP had also framed margin financing rules and
regulations for banks.
Q: Badla is not
available easily at stock market due to capping of
Continued Finance System (CFS)?
Unless we phase out badla, other more documented
instruments of financing would not flourish in the
market. When we talk about the elimination of
undocumented mode of financing, the people must be
provided with other effective sources of financing and
naturally the documented mode of financing seems more
stringent source of financing which requires due
diligence of financee, which is why that brings
stability in the market. So capping is more important
because we have to phase it out. Otherwise, we will have
the same situation in which we were in March this year.
Average badla volume which was 22-23 billion rupees in
the last two to three years increased to 40 billion. So
to say that is the appetite of the market today. I think
that is not sufficient appetite. We would have to make
sure that the March-like scenario should not erupt
again. We also want to make sure that we have a stable
market and we want to make sure that we protect the
Give us the
specific examples where the margin financing is not
available and what are the issues hampering it. If it is
a real problem we will resolve it, and if it is a
general impression that the money is not available it
does not seem true.
Q: LSE brokers
have filed applications for margin financing but the
facility is still not available?
Margin financing rules and regulations had been
finalised a couple of years ago and this excuse could
not be used for non-availability of financing.
In fact, the
issue of double margin was raised by the brokers which
was resolved by the SECP. A fact should also be kept in
mind that we cannot dictate the banks to lend on
non-commercial terms to brokers. If the brokers
community wishes to get loans on easy terms and be the
only beneficiary, then I feel there is a misalignment in
the thinking of what the banks and the brokers want.
Whatever is agreed between the brokers and banks, it
should be done on commercial terms and the brokers must
not expect from the SECP to use its influence to force
the banks to provide financing at the terms and
conditions, suiting the brokers.
Q: Is Rs 18
billion margin financing meant for Lahore Stock Exchange
This amount of margin financing, committed by the banks,
is meant for all the three stock exchanges and the
brokers are supposed to avail this financing facility.
Q: What about
We have been holding road-shows with the CDC and stock
exchanges regularly which are aimed at creating
awareness among the investors and warning them against
risk factors. It has been our endeavour to promote
investment and protect investors at the same time.
measures SECP putting in place to eliminate market
Securities and Exchange Commission of Pakistan would
soon initiate a comprehensive drive to curb white-collar
crimes from the capital markets in Pakistan. The
in-house capacity-building process of the Financial
Crimes Task Force of the SECP would be ready shortly and
it would focus exclusively on the elimination of
white-collar crimes, including the stock market abuses.
Our team is almost ready to combat financial crimes and
we will soon announce its launching.
nature of white-collar crimes in capital markets, he
said that some illegal brokerage houses and forex
companies have been detected by the SECP. Dr Tariq said
that the force of the SECP would keep a strict vigilance
on the capital market, monitor it regularly and prevent
the clandestine business of illegal brokerages and forex
companies. Regarding scope of the functioning of the
Financial Crimes Task Force of the SECP, he said that
initially it would focus only on white-collar financial
crimes, taking place in the country's capital market.
government allowed and amended the law, the scope of the
task force could be further extended to financial crimes
taking place in other areas, said the SECP Chairman.
disclosed that the SECP was taking action against the
brokers and investors involved in recent stock market
He said that
the SECP would continue to investigate the stock market
abuses. Whenever we will receive any complaint, the SECP
will initiate a probe to find out the truth with the
objective to discourage capital market abuses and to
Q: What is
progress on merger and demutualisation of bourses?
The commission has received reports of merger of LSE,
ISE and demutualisation of KSE. The bourses are expected
to submit their business plans and schedule of
preparation next month. The LSE and ISE have shown
interest in their merger while KSE has shown interest in
Q: What is the
deadline for setting up National Stock Exchange?
Lahore and Islamabad stock exchanges have shown interest
in establishing a National Stock Exchange through their
merger. The creation of a national level bourse would
depend totally on the business plans and recommendations
of the bourses and the SECP had nothing to do with it.