ISLAMABAD, April 25: The National Assembly on Friday decided to re-examine the March 2005 stock market scam after some members, mostly of the Pakistan Muslim League-N (PML-N), criticised policies of the previous regime and demanded stern action against people responsible for the country’s present economic crisis.

Speaker Dr Fehmida Mirza referred the issue to the Standing Committee on Finance when Finance Minister Ishaq Dar, responding to a point of order soon after the question hour, requested the house to suggest action to be taken against people responsible for the fraud.

In March 2005, the Karachi Stock Exchange (KSE) crashed inflicting over Rs700 billion losses mainly on small investors due to alleged manipulations by a small number of influential brokers in connivance with some top government functionaries.

The market capitalisation of the KSE dropped from its highest level of $46.89 billion on March 15 to $35.21 billion on March 28, a decline of $11.68 billion.

Responding to the point of order raised by PML-N MNA from Lahore Sardar Ayaz Sadiq and a question from Pakistan People’s Party MNA Yasmeen Rehman, Mr Dar said the previous regime had not taken any action against the influential brokers and government functionaries who were responsible for the “huge fraud”.

He said the crash was investigated on different occasions and by different agencies, including a task force of the Securities and Exchange Commission of Pakistan (SECP).

The report of the forensic investigation carried out by a US firm (Diligence) was submitted to the standing committee of the previous assembly on November 21, 2006.

He said the committee deliberated at length and the forensic experts were also summoned. But, he said that he did not know whether the committee had presented any report to the house.

The finance minister alleged that the previous regime “washed off” the two important reports on the stock market scam in which small investors had lost billions of rupees.

He said the reports were still available and could be taken up by the standing committee.

The minister also read out an extract from the US forensic report which stated that “prima facie evidence of possible wrongdoing by a significant number of brokers in certain areas” had been found.

He said show-cause notices were issued to 69 brokers and after subsequent hearings, the SECP issued warning letters to them.

Earlier, in a written reply to Yasmeen Rehman’s question, the minister said there was volatility in the stock market in June 2006 and the market capitalisation dropped from the month’s high of $49.48 billion on June 6 to $41.36 billion on June 14.

Mr Dar said that show-cause notices had been issued to 34 brokers of the KSE and 24 of the LSE. The SECP also imposed Rs3 million fine on the brokers for violating rules and regulations.

In 2006-07, he said the risk management systems at the stock exchanges worked effectively and the sanctity of the contract, integrity of the system and the stability of the market were all maintained.