12 brokers put on notice: SECP: Probe into KSE crash
By Sher Baz Khan
ISLAMABAD, July 26: The Securities and Exchange Commission of Pakistan (SECP) has issued notices to 12 brokers for their suspected involvement in the March 2005 crash of the Karachi Stock Exchange (KSE).
“The SECP has issued notices to all those Karachi-based brokers whose names are mentioned in the task force’s report on the stock market crisis,” official sources said here on Wednesday.
The brokers have been directed to provide data of their transactions made prior to KSE crash, they added.
The commission has also issued some 50 notices to brokers of the three stock exchanges in the May/June 2006 market crash.
The data of share transactions would be audited by the US team of forensic investigators and, if needed, the circle of investigation would be extended to other brokers and stakeholders whose names were not included in the task force’s report.
The team had completed almost one-fourth of its job, they said.
Officials say that the ongoing forensic investigations would cost over $1 million, turning out to be one of the most expensive corporate probes in the country.
“The US team of forensic investigators, which the SECP has invited, is costing more than $10,000 a day. If we go by this calculation, they are likely to charge $1 million at the end of the stipulated time of three months,” a credible source said.
He said that the US investigators were also being provided accommodation in a five-star hotel besides other facilities including return business class air tickets.
The cost of the probe would also include the spending and TAs and DAs claimed by the SECP officials accompanying the US team.
The SECP had confirmed that forensic investigation would cost about $1 million. According to the commission, at present there were three American forensic investigators busy in Pakistan, while two others would join them soon.
The SECP would bear the cost of the probe. “How much this probe costs is not an issue. We are determined to unveil the faces behind the stock market crash,” an official said seeking anonymity.
The commission is also in the process of amending its laws to increase the fine amount from Rs20,000 to Rs1 million and also include jail terms.
However, those found guilty of the last year’s market crash would be convicted under the existing laws, which meant that the manipulators would pay only nominal fine and continue their businesses.
The commission had decided to recruit about 200 regulators and enforcement officials in its regional office in Karachi. The present SECP staff was not sufficient to regulate the market which had expanded considerably over the last few years.
The Lahore, Islamabad and Karachi stock exchanges were being integrated with the implementation of the Universal Identification Number (UIN) and Client Number that would also help curb illegal practises and determine the nature of transactions and those involved in them.
The SECP had ordered procurement of equipment for the state-of-the-art ‘market surveillance system’ and would be operational by the end of September.
The new system would enable the commission to audit share transactions of the country’s three stock exchanges in real time and get hold of manipulators there and then.
