THE Karachi Stock Exchange issued a statement on Friday which caused considerable interest, particularly among the small shareholders.

It said: “The KSE has resolved to extend all possible assistance and cooperation to National Accountability Bureau (NAB) to apprehend the perpetrators of unlawful/fraudulent activities by some defaulter/ expelled members of the exchange, as a result of which the investors/clients of those expelled members have suffered financial losses.”

And the statement went on to add: “The KSE under its rules and regulation had already made financial reimbursement to the investors who had suffered losses at the hands of those defaulters/expelled members.”

Mr Nadeem Naqvi, managing director at the KSE affirmed in reply to queries that the matter related to the defaulter and expelled members of the exchange of the stock crisis of 2008. It was one of the worst episodes in the KSE history that turned many a prosperous investors, to paupers as the KSE-100 index plunged by an incredible 10,000 points from 15,737 to 4,782— in a matter of months.

Market players argue that the bear onslaught of 2008 was worsened by the global equity meltdown and the crisis at the KSE turned into catastrophe only after the imposition of ‘infamous floor’. The ‘floor’ that virtually blocked the exit of investors was placed by the then regulators, but latter no one was willing to take the blame.

As the crisis deepened and going got tough, brokers in trouble sold clients’ shares to meet their own obligations and the depth of the damage came to light only when the dust settled. The SECP suspended the registration of several brokerage houses, stating that it was done “in public interest and for the protection of investors and to preserve capital market integrity, till claims against them in light of investor’ complaints could be ascertained and settled.”

Some market experts recall that as many as ten stock brokers went broke. Six of them were expelled by the stock exchange and there were a couple of ‘defaults’. Some in default have since gone missing. Beleaguered investors, who were hunting for them knew that they had fled the country defying the ban on their exit.

The KSE MD told this scribe on Friday that under the guidance of the apex regulator, the Securities and Exchange Commission of Pakistan, the Board of Directors of the KSE and the management were in constant dialogue with NAB.

Over the last three months several officials of the accountability body, including the deputy director general had visited the KSE and held meetings with the Board and the management.

“The key objective”, affirmed Mr Naqvi “is to bring fraudulent elements of the 2008 crisis to justice.” The KSE Managing Director informed that about a billion rupees were disbursed by the exchange as compensation to around 3,600 affected investors. Mr Naqvi said the compensation was made by the money raised through two sources: sale of the defaulter and expelled brokers’ membership card and withdrawing Rs75 million per defaulter/expelled member, from the Investor Protection Fund that the bourse had built up over 20 years.

He said approximately half of those aggrieved investors who had lost all money to those rogue brokers were fully compensated and only a couple of people “had to take haircut.” But some of those affectees complain that the then managing director seated across the table had put before the beleaguered affectees the Hobson’s choice—-take what is offered or nothing. And most were paid only a pittance of their losses.

Yet most small investors and dealers at the exchange appreciate the fact that, while investigations into the three previous stock crisis— one in March 2005, the second on May 2000 and the third in early fifties, had all come to naught, the regulators and the investigators were still sniffing the trails of the rogue brokers of 2008.

Aggrieved investors who still were short of the reimbursement of their losses against defaulter members had no recourse. Veterans say that in usual cases, in order to settle dues, the law does not allow the confiscation of personal property nor does the stock exchange have powers to initiate criminal proceedings against such brokers. Those powers are vested in the apex regulator.

An old man in the trading hall who was reading the KSE statement of Friday, murmured: In Japan, the disgraced commit Hara-Kari; during the Great Depression who lost all their money on Wall Street, quietly put pistols to their heads and pulled triggers. But things are changing.

Said this man: “ And over here, it is the norm for such people to decamp with public money and lie low until the issue has died down. They then resurface with a new face lift-an abbreviated name, a moustache-and quietly reoccupy their deserted posts.

Yet, the fact that even after four years, the regulators and the law were chasing the rogue brokers of 2008 who are on the run, represents a welcome change.

As the equity markets all across the world, including Pakistan, were heading south, there could not be a better time to instill confidence in the hearts of panic-prone investors and to show that after all it might now be getting difficult to perpetrate a financial fraud and also easily get away with it.