November 20, 2006	Monday	Shawwal 27, 1427

HAS the US team of forensic investigators demystified anything new that caused a panic in the finance ministry and pushed it into another controversy when it delayed indefinitely, the November 13 meeting of the National Assembly Standing Committee on Finance and Revenue in which the interim report on the March 2005 crash of the Karachi Stock Exchange (KSE) was to be presented?

Small investors are asking many such questions these days. In fact, these were the people who suffered over $13 billion losses in the KSE crash last year. A smoke of suspicion and confusion has clogged the market as some of the NA Committee’s members have now come up with another stunning revelation by accusing the finance ministry for removing,, at the last moment, appearance of the members of the Justice (Retd) Saleem Akhtar’s Committee and ex-Chairman of the SECP, Dr Tariq Hassan from the agenda of the meeting. These officials had reached close to the “big fish” involved in the last year’s market crash during the investigations of the Task Force.

Members of the committee, MNAs Sardar Ayaz Sadique and Liaqat Baloch have alleged that the finance ministry wanted to hush up new report and save Prime Minister Shuakat Aziz, who was on his US visit at the time, from an embarrassing situation that could have arisen after the report was made public.

“This is a blatant violation of the rules. How can the finance ministry change the agenda of the meeting as requisitioned while keeping the members (of the committee) in dark. We strongly protest it,” said Sadique.

The members have demanded that Dr Tariq Hassan along with the members of the Justice Saleem’s committee, including Dr Mohammad Zubair be given a chance to tell the people what they had found and that whether any of their recommendations for the risk management system and safeguards to small investors have, so far been implemented by the SECP.

The SECP Chairman, Razi-ur-Rehman has said that he was willing to present the report in the meeting, however, the Commission had been informed by the finance ministry that the meeting was postponed.

There is still a complete mystery about the findings of the new report. Even people close to the SECP chief say that they have no clue of the contents of the report. The SECP Chairman and a few high-ups of the finance ministry, who are working with the US team of forensic investigators, know about the findings.

Small investors are swinging between high hopes and despair as the market is buzzing with the word “forensic” ever since the meeting was delayed.

But, whether the new probe would have the potential to give a shark-like biting power to the apparently toothless watchdog – SECP – to enable it bring high profile individuals and institutions involved in the crash to justice and implement the recommendations of the report across the board? This is not an easy question to answer.

However, a comparison between the responses of the SECP to March 2005 crash (when Dr Hassan was the Chairman) and the May 2006 market fall that came in Mr Rehman’s basket would greatly help us understand the future of the report of the US team of forensic investigators in particular, and the country’s bourses in general.

“The fault, dear Brutus, is not in our stars, but in ourselves that we are underlings,” or so stated Dr Tariq Hassan while quoting from the famous drama of William Shakespeare “Julius Caesar”.

The ousted chairman was presenting a White Paper on last year’s market crash to the NA committee on July 7. He reiterated that the paper had all the evidences to prove that he was under immense pressure from the Minister of State for Finance, Omar Ayub Khan and Advisor to the Prime Minister on Finance, Dr Salman Shah, not to go ahead with the reform process as recommended by the Task Force. It contained a letter in which he had informed Prime Minister Shukat Aziz about the issue.

Dr Hassan has also claimed he had reached very close to a few “big fish” when he was shown the door.

The Task Force had recommended the replacement of Badla Financing (Carry-over-Transaction or CoT) with the Margin Financing, and the ex-SECP Chief wanted to do so. But, Dr Hassan was forced to take back his decision in a meeting with the Prime Minister and the brokers in Islamabad and announced the Continuous Financing System (CFS) as a replacement to Badla after receiving threats of another market crash from the brokers.

The White Paper of Dr Hassan is full of evidences as to how he was forced not to implement the whole set of risk management measures as recommended by the Task Force. He has also warned that without enforcing the risk management regime, the March 2005-like crashes would resurface from time to time.

But, after Dr Hassan’s removal, the reform process has become stagnant.

The incumbent SECP Chairman, Razi-ur-Rehman himself is under extreme pressure from the brokers and management of the country’s bourses. On November 2, he was compelled to announce a month’s delay in the implementation of Risk Management System by bourses in a meeting with the brokers and management of the three stock exchanges in Islamabad.

He is also getting directives from the finance ministry to remain tight-lipped on the findings of the interim forensic report. Being the head of SECP, Mr Rehman can submit it to the NA’s Standing Committee before the meeting. But, he would not do so.

The deadline for completion of whole forensic probe was 90 days (the first week of October). But, so far, the SECP has just completed half of its work.

The reality is that whenever the SECP tried to show its teeth and implement Risk Management System, the Commission landed into troubles that ranged from extreme pressures from the brokers to a dangerous bearish trend and crash-like situation in the country’s bourses. Another-market-crash fear has always let the SECP down. And, the market participants are aware of this.

At present, there seems to be no difference between the SECP of Dr Hassan’s time and that of Mr Rehman’s. The only apparent difference between the two chairmen is the boldness Dr Hassan has shown when he openly accepted the weak response of the SECP to the crash and made public the names of some people who kept him under pressure.

For Razi-ur-Rehman, to acquire the boldness of Dr Hassan seems impossible so far as he enjoys his present portfolio. After all, Dr Hassan also opened his mouth when he felt that he was being made a scapegoat after his removal.

The dreams that the report of forensic probe would change the world are destined to prove futile because Mr Rehman has already made it clear that even if grabbed, the actors of the March 2005 stock market crash would be tried under the SECP laws enforced at that time.

The irony is that those who caused loss of billions of dollars to the market would easily be able get away with everything by paying a fine of maximum a few hundred thousands rupees. There is no conviction, no punishment of imprisonment, and no ban on the businesses or black-listing or putting the names on the Exit Control List (ECL).

However, the forensic report’s recommendations would put further pressures on the SECP and the government to move ahead with the reform process and risk management regime.