ISLAMABAD, Nov 26: The Securities and Exchange Commission of Pakistan (SECP) conducted 19 inspections this year into violations of rules and regulations committed by major players of corporate sector and stock market.

The commission had suspected that substantial shareholders’ interests may have been affected or damaged where such activities were observed.

In some companies, inspections revealed instances where raw material worth millions of rupees was misappropriated under the disguise of impairment and series of suspicious transactions potentially leading to a concerted scheme aimed at striping off the company from its assets in a phased manner.

In one such instance premises of a listed company was leased without shareholders approval and rent was taken away by one of the directors and in other manufacturing facility was leased out and the rent was received by the associated concern.

Some investigations also found that funds raised through the issue of rights shares were funnelled out of the listed company by extending advances and loans to the directors, etc. While in another case, fake shares of a listed company were in circulation and proceedings were underway to get hold of those involved in this criminal activity.

The commission here on Wednesday issued some sketchy details of its regulatory enforcement activities since January this year. The SECP’s official spokesman said that most of the actions were taken to safeguard the interests of the small players. During a number of inspections, the SECP found that books of accounts also revealed that some of the companies were not maintaining basic statutory record, which includes fixed asset register, shareholders register, minute’s books of directors/shareholders meeting and books of accounts of the company.

In order to improve compliance, punitive action has been taken against such companies, under the relevant provisions of the Companies Ordinance, 1984. As a result of inspections, further proceedings under Section 263 of the Companies Ordinance, 1984 have been initiated against certain companies.

However, some companies have resisted the inspection orders of SECP and have filed appeals.

Various enforcement actions were taken by the SECP during the year which included directing the company to undo the defaults and to carry out certain actions whereby shareholders interest was protected by presenting true picture of the state of affairs of the companies.

The Enforcement Department under various provisions of the Companies Ordinance, 1984 had passed 107 orders during January to October period while a number of other proceedings were pending for finalisation.

Earlier, the SECP had conducted an investigation in the case of a listed company where the directors had sold off the company’s investment in shares of another listed company to an associated off-shore company and as a result of the subsequent sell-off of the other listed company pocketed huge gains.

The SECP restrained those involved in this criminal activity from receiving the proceeds of the price differential from the fraudulent deal, and directed that the payment be held in trust with the SECP.

The directors of the company went into appeal against the order of the commission before the Sindh High Court. However, the court dismissed the appeal while stating that the detection of scam by SECP in the case was commendable and that the appeal had no merits.