April 04, 2007	Wednesday	Rabi-ul-Awwal 15, 1428

ISLAMABAD, April 3: The Securities and Exchange Commission of Pakistan (SECP) on Tuesday cleared 56 of the 69 stock brokers who were served notices following stock market crash of March 2005. Hearing of remaining 13 would be held this week, the apex regulator said in an early morning announcement. But the SECP observed that “no evidence of short selling had been revealed.”

The biggest crash in the KSE history has finally been buried under the debris as the apex regulator had declared that no evidence was found in the probe against these brokers out of 88 who were identified by a US forensic firm to fix the responsibility of the market manipulation. The cost of the forensic report is said to be over $1 million.

Notices were served to 69 brokers by the SECP on the basis of the forensic investigation report released in November 2006 for failure to comply with the requirements of regulation 3(b) of the regulations governing futures contracts of KSE in February-March 2005. The SECP had, however, absolved 19 brokers, as no case was made out against them and issued show-cause notices to the remaining ones.

An SECP announcement issued here on Tuesday said that it was decided to take a lenient view in the matter and not to take any punitive action under rule 8 of the Brokers Rules. Whereas, “caution” in this instance to the brokers would suffice and brokers are further directed to ensure that full compliance is made to all the regulations in future for avoiding any punitive action under the law.

As regards, hearing for remaining 13 brokers will be held in the current week and orders will be issued in accordance with the law. However, it was observed that no evidence of short-selling had been revealed from the examination of the records provided by the brokers.

According to the announcement that “of the 69 brokers extensive hearings had been completed in respect of 56 brokers and due process was followed to enable the brokers to explain their position and the arguments furnished by the brokers were taken into consideration in preparing the final order. The final orders are being issued to all the 56 brokers on Tuesday,” added the announcement.

The orders essentially state that considering the arguments presented in writing, as well as at the time of hearing and having perused the documents and information placed on record, the SECP is of the view that brokers have not fulfilled the requirement of reporting, taking action as envisaged under the regulation 3(b).

However, certain extenuating circumstances have emerged from the brokers practice of supplying the requisite evidence under regulation 3(b) only when required by the exchange, which may have persuaded the brokers to believe that they had discharged the obligation under regulation 3(b), which clearly they did not.