ISLAMABAD, Nov 28: The Securities and Exchange Commission of Pakistan (SECP) has appointed a three-member committee to investigate into the forged fax message drama announcing Hub Power Company’s dividend and subsequent stock market crash.

The committee, led by Kamal Afsar, chairman, Pakistan Reinsurance Company and comprising Abdul Wahab Kodavi, Central Depository Company and Shaharyar Ahmad, Senior Executive Vice President, United Bank Limited, would submit its report latest by December 31, 2001.

SECP commissioner (securities market) Shahid Ghaffar said in his order: “Prima-facie, it appears to be an act of certain insiders in terms of the provisions of section 15-A and 17 of the securities and exchange ordinance 1969”.

Under terms of reference (TOR), the committee would determine the fact concerning the fax dated November 20, 2001 including the actual source of such fax and whether it was sent to KSE with the intention of committing acts in violation of sections 15-A and 17 of the SEC ordinance 1969.

The committee would also determine whether culpability, with respect to violations of laws committed, lies on any the market participant and Hubco officials in the delivery of price sensitive information.

It would look into adequacy of procedures in place to deal with market sensitive information and its dissemination at the KSE and make recommendations to prevent a recurrence of such events.

SECP said a fax message of Hubco informed Karachi Stock Exchange (KSE) on November 20 that Hubco lenders have approved 22 per cent dividend for the year ended on June 30, 2001.

That this information moved up the Hubco scrip, the company management informed the KSE that the message was forged and not issued by them. This led to confusion and controversy, and besides shattering the investor confidence, it resulted into suspension of trading in Hubco shares.

On November 23, however, the company issued a press release to confirm the 22 per cent dividend which evidently proved that the November 20 fax message was correct though it might not have been issued by the company.

The three-member committee would review and provide comments on the actions taken by the KSE to deal with this matter. It would also point out violations of law that have been committed including but not limited to sections 15-A and 17 of the SEC ordinance 1969 and recommend whether or not in line with the laws of Pakistan and international practice, corrective measures should be taken for redressal of losses incurred by innocent market players.

The committee would also be examining any practices in the securities markets which greatly increased the potential and possibility of insider trading.