KARACHI: The report on the “stock market crisis of 2008” has finally found its way to the offices of the Securities and Exchange Commission of Pakistan (SECP).

Akif Saeed, Commissioner, Securities Markets Division, at the apex regulator told Dawn on Saturday that the report would be released for public view after approval by the SECP Policy Board.

A meeting of the SECP Policy Board which is chaired by the Secretary, Finance Division, is expected to be held next month.

The great crash of 2008 had swept over trillion rupees from the market and no participant, including stockbrokers, could escape the damage.

It all started on April 20, 2008, when the stock prices began to collapse and the KSE-100 index plunged by almost 55 per cent in four months.

Four years later, the SECP had initiated an inquiry to determine the causes of the 2008 crash.

Shamim Ahmed Khan, former chairman of SECP, was mandated to conduct an independent study and submit the report by April 2013. The date was extended to July that year to facilitate expansion in scope and to dig deeper into the causes.

Many market participants question if the report that has now seen the light of day after seven years of the event has relevance. Author Shamim Ahmed Khan says the passing of years does not diminish the significance of the report.

He mentioned in particular the part of the report that deals with recommendations and conclusions which points to the remaining weaknesses in the system, policies, processes and the relevant regulatory framework.

While leaving it to the SECP to unfold the report, Shamim Ahmed Khan stated that the fundamental issue identified by him was the ‘conflict of interest’.

“Some members of the board of directors of the stock exchanges were also active members of the broker community,” he pointed out.

Besides, the act of putting a ‘floor’ under the market floor from Aug 27, 2008, to Dec 15, 2008, turned the catastrophe into calamity. The ‘floor’ remained in place for as many as 108 days. That virtually closed the exit door of the market.

Such blockage was unheard in the history of the stock exchanges.

Shamim Khan says: “The inquiry report thoroughly covers all aspects of the stock exchange crisis and the role of all relevant participants, including the SECP, the three stock exchanges, Central Depository Company (CDC); National Clearing Company of Pakistan Limited (NCCPL), the stock brokers, investors and others.

Some of the market watchers were, however, skeptic. “The government and SECP had conducted in-depth investigations into stock market crisis of 2000, 2002, 2005 and 2006 as well, but what was achieved?” asked one.

He lamented that neither the perpetrators of those crisis that caused the market irretrievable loss in money and investor confidence were identified nor brought to book.

“Those reports would be sitting on the shelves of some government department collecting dust and this would be the latest edition”.

Published in Dawn, July 26th, 2015

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