ISLAMABAD, July 10: Adviser to prime minister on finance, Dr Salman Shah, has rejected the allegations of former chairman of the Securities and Exchange Commission, Dr Tariq Hassan, that the finance ministry had stopped him from implementing the recommendations of the taskforce on the March 2005 market crash.
Speaking at a press conference here on Monday, Dr Shah also said that the removal of Dr Hassan from his post would not stop the reform process at the stock exchanges. “Reforms never revolve around mere individuals but institutions,” he added.
In response to a question, he said the government had so far not charge-sheeted the ex-chief of SECP but the ongoing forensic investigation, which would be completed in three months, would bring forth the names of all those involved in the crash. No one would be spared. The government would of course level charges against Dr Hassan if he was found involved in the market crash, he added.
“This time the punishment would not be only a Rs25,000 fine. But it would be a more strict punishment,” he stressed.
Minister of State for Finance Omar Ayub Khan was also present.
The Adviser said the taskforce report had no mention of the finance ministry but in fact that of the SECP, the board of Karachi Stock Exchange and some brokers.
Dr Shah had organised the press conference in order to defend allegations regarding the pressure he and Omar Ayub had put on Dr Hassan compelling him to freeze forensic investigations against the 11 high-profile brokers and stop phasing out Carry-over Transaction (CoT) — also known as Badla and one of the main reasons for the market crash — with Margin Financing.
The matter became serious when Dr Hassan read out two letters to the National Assembly standing committee on finance and revenue on Friday. The letters had been sent to the prime minister in which it was alleged that Dr Shah and Omar Ayub were putting a lot of pressure on Dr Hassan to avoid implementing the taskforce recommendations.
“I want to clarify that the ministry of finance had no connection with the March 2005 stock market crash. I am here because the allegations of Dr Hassan are spreading with the passage of time. In the meeting of the National Assembly standing committee, he was more aggressive,” Dr Shah said.
He questioned as to why the former chief of SECP was now making allegations and as to why he did not reveal all these things to the standing committee when it met in August last year.
He said the finance ministry had neither any hand in the rise of the market nor in its subsequent crash.
Dr Shah was asked if the finance ministry had no hand in the rise and fall of the market, then why adviser Dr Ishfaq Ahmed, the prime minister and a number of other government officials issued statements that the market would rise to certain levels. He replied: “These days speculations are all around because there are four television channels which invite speakers and where people do speculate. Investors must not follow speculations.”
The adviser claimed that the March 2005 market crash had reduced the prices of shares by $13billion which was related to the reduction in market capitalisation but was misinterpreted as losses to small investors.
The finance ministry, he added, had not stopped SECP from replacing Badla financing with Margin Financing. On April 23, the SBP appointed a committee headed by the then president of the Pakistan Bankers Association, Shaukat Tareen, to give recommendations on the smooth phasing out of Badla in order to ensure liquidity in the market, he said.
The committee had recommended that there should be Rs20billion available in Margin Financing for the market before replacing the Rs12billion Badla financing. However, by July 2005, only Rs200million was available in margin financing.
