Regulatory objectives of the two institutions could only be met through a consultative process


Sep 08 - 14, 2003

The Governor State Bank of Pakistan (SBP) Dr. Ishrat Hussain and Chairman Securities and Exchange Commission of Pakistan (SECP) Dr. Tariq Hassan resolved to work in close cooperation to build up a strong and effective regulatory framework within the country. The two institutions would work together to institutionalize the crisis management mechanism. They also agreed to seek assistance from National Accountability Bureau (NAB) in investigations.

They were expressing their views in a meeting of the Co-ordination Committee of SBP and SECP held in Islamabad. It was also decided in the meeting that the ongoing action against brokerage and forex companies carrying an illegal, unauthorized and fraudulent activities will be vigorously pursued. The meeting which was held at the SECP head office was attended by senior officials from both institutions.

Dr. Tariq Hassan, who took over as Chairman SECP recently reiterated that effective enforcement of relevant rules and regulations and institutional strengthening would be the major area of focus for the SECP as it embarks upon a new era of sustainable development for the capital market and corporate sector in Pakistan. He assured Dr. Ishart Hussain of SECP's continued cooperation with SBP in building a strong regulatory framework within the country. He said that the SECP had come a long way since its inception in 1999 and he would continue the process of developing the regulator.

Chairman SECP further said that the regulatory objectives of the two institutions could only be met through a consultative process with all stakeholders and he intended to adopt a participatory approach in fulfilling the mandate of the SECP. SECP would continue to facilitate investors by promoting an efficient and transparent capital market and corporate sector and engendering confidence and faith in the integrity of the market. The Commission would also be looking into further deepening the market and improving risk management, especially at this time when the market is performing remarkably well.

Governor SBP congratulated the Chairman and assured the Commission of continued cooperation and facilitation from SBP. He hoped that SECP would continue to be an effective and efficient regulator under the Chairmanship of Dr. Hassan. He also stressed the need to establish easy access to date between the two institutions.

The main areas of discussion at the 8th coordination committee meeting between SECP and SBP included the on going proceedings against a number of brokerage and forex business, margin financing and monitoring on non-bank primary dealers. On the issue of non-regulated brokerage business, the two regulators agreed that many payers in the market were trying to take advantage of the division of regulatory authority between the SECP and SBP and that the two institutions should continue to work together to ensure that a comprehensive regulatory framework is in place. It was also decided that SECP and SBP would make joint efforts to create awareness amongst the public regarding the legal position of investments with such individuals/companies.

The SECP has in July last unearthed 39 companies which were involved in the illegal business of raising deposits from general public. On request of the SECP, the different high courts in the country namely in Punjab and Sindh have frozen the accounts of 14 companies and placed their directors on the exit control list. The investigations are on against the remaining companies in which SECP has also sought help from the National Accountability Bureau (NAB).

According to press reports, there are some 70 such bogus outfits that have been defrauding people. Promising profits as high as 20-70 per cent per annum, they have been able to attract nearly Rs.10 billion of public money. Typically, they would ask their clients for minimum payment of $5,000.

All of this money, of course, went into their personal accounts. The unsuspecting clients were also asked to sign an agreement stipulating that in the event of loss of investment, the local or foreign broker would not be liable to bear any cost. This obviously was meant to serve as a decure escape route, that the crafty swindlers intended to take once they had collected as much money as was available.

It is not the first time that a scam involving public money has surfaced in this country. Hundreds of thousands affected by the dubious finance companies and the township schemes scandals, fraudulent recruitment agencies and the cooperatives scam are still waiting for the government to get them some kind of compensation for their lost money. And here is a fresh scam involving operations like the present one do not take place over a few days or months period; they too need some time to become known so as to lure simple people. Yet the regulatory agencies, SECP in the present case, are the last ones to notice fraudulent activities within their respective jurisdictional spheres. It seems there is some thing wrong some where in the system.