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Leading brokers attempt to get SECP report revised -

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Mehtab Haider
Saturday, August 17, 2013

Some leading brokers are making hectic efforts to get findings of a report by the country’s top regulator revised that exposed multibillion rupees manipulation in the stock market, causing massive losses to the state-run financial institutions, officials said.

In 2010 and 2011, public sector financial institutions, including the National Bank of Pakistan (NBP), the National Investment Trust (NIT), Bank of Khyber and Bank of Punjab purchased millions of shares of the Sui Southern Gas Company Limited (SSGCL) and the Sui Northern Gas Company Limited (SNGPL) at higher than the market prices, they said.

The unusual activity was spotted by the Securities and Exchange Commission of Pakistan (SECP), which conducted a preliminary inquiry into the mega scam, they added.

SECP’s deputy director of its now defunct Surveillance Wing, Shazia Baig, led the inquiry and found out that millions of shares of SSGC were purchased above the market prices by these institutions, causing massive losses to the national exchequer.

With the approval of SECP’s policy board, a report was submitted before the Supreme Court on July 10 during the hearing into the infamous Ogra scandal.Sources say if the figures of the stock market manipulation of 2010-11 are added to the Ogra scandal’s Rs82 billion fraud, the amount would jump to at least Rs152 billion.

Therefore, a Karachi-based broker AKD is lobbying at the highest level in recent weeks to get the report findings revised and to make its entire content controversial, said a SECP official requesting anonymity.

Federal Secretary Finance Dr Waqar Masood Khan, who is also the chairman of SECP’s policy board, when inquired about the possibility of the revision of the report, said that certain stakeholders complained that their viewpoint was not incorporated into the report. “Now we have asked the concerned committee to come up with its findings in the next policy board meeting in which the decision to this effect will be made,” he said.

The board meeting, which was scheduled for August 19, has been postponed because of the unavailability of one of its members, he said.Aqeel Karim Dhedhi, chairman of the AKD Group, in a letter dated July 31, 2013, has urged the Secretary Finance Dr Waqar Masood to provide him an opportunity to “assist the policy board in order to ascertain the actual facts.”

The letter, a copy of which is available with ‘The News’, states that Ms Bushra Aslam was also appointed as member of the committee for preparing a report on the directives of the Supreme Court, which was alarming and basically remains a conflict of interest as she happened to be the respondent number 6 in the petition. Dhedhi also alleged that the compliance report was used to defame him.

However, SECP sources say that even from within the institution a senior official namely Imtiaz Haider, who was a former employee of AKD, was trying to oblige his former boss.“He was close to the former SECP chairman Muhammad Ali, who was sacked on the Supreme Court orders,” said the SECP official. “This person is trying to lobby in favour of his former boss … there is a direct clash of interest as he holds a senior position in the SECP,” he added.

The investigation into this alleged scam started in the aftermath of 2008 stock market crash in which big market players were stuck with huge amount of shares, which they wanted to offload at higher price.

At this point of time, these players allegedly used their influence to get their favourites appointed against key positions in important financial institutions. These favourites obliged their patrons by buying low priced shares at a higher price, official sources say.

“Now efforts are underway to divert attention from this mega scam by making all reports controversial despite the fact roughly more than Rs44 billion were manipulated from the stock market through this scam,” said the sources.

However, the National Accountability Bureau (NAB) has collected enough evidences to prove inside trading and market manipulation in the SSGCL and SNGPL scrips as an effect of change in UFG (unaccounted for gas) benchmark by former Ogra chairman Tauqeer Sadiq.

The earlier inquiry into the scrips of SNGPL and SSGCL by Shahzia Baig noted that the share price of SSGC was at level of Rs19.95 at the start of the month Sept 2010 and thereafter continuously moved upwards and reached its maximum price at Rs30.28 on Sept 30, 2011.

During the price hike, the NBP was its top buyer with approximately 4.0 million shares amounting Rs104 million, and the AKD securities was the top seller with more than 2.0 million shares amounting Rs63 million.

According to the report, the similar effects of change in UFG-benchmark caused hyper activity in the SNGPL shares in the last four months of 2010.It was observed that an unusual turnover of more than 9.0 million shares was recorded in this stock in a single day session in 2010.

It was revealed that this volume was mainly distributed mainly among three major buyers and handful of brokers as major sellers.Market players say that the authorities should conduct an in-depth investigation into this scam. They proposed forming of “an independent joint committee comprising NAB, SECP, FBR, FIA and other investigators to expose this white collar crime, which appears to be just the “tip of the iceberg” for this broker and his partners.”

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