KARACHI, April 29: While the corporate watchdog-The Securities and Exchange Commission of Pakistan-appears to be taking a nap, the essential rule of "disclosure of material information" , in right and proper way through the stock exchanges is being blatantly flouted by company managements.

The board of directors of the Fauji Fertilizer met on Wednesday to approve accounts for nine-months ended March 31, 2004. All of the market was expecting the company to declare a bonus issue.

The announcement came at around 1:37 pm and there was no bonus, instead the directors gave out the results and approved first interim dividend at Rs3.25 per share. Fair enough. The market could have been at fault in making a wrong judgment.

The price of the stock dropped by Rs8. But just around the time of closure of the market, the stock began to climb again, rising by around Rs7. Everyone wondered why? And the mystery was unravelled when one minute before the closure of the market another announcement from the board came up saying that the authorized capital of the company was being raised.

Since in effect that meant making room for a latter announcement of bonus, small investors grumbled that between the first and second announcements, small shareholders lost money and insiders made big gains.

And on Thursday (April 29), several newswire services flashed the PTCL financial results for the period ended March 31, 2004 in the morning, much before the announcement made at the stock exchange by the company's board of directors. Who dished out the information and did those who got to it first made some substantial gains?

And the cases are countless. One company discloses that it has submitted Expression of Interest (EOI) for the cellular licence; another stock exchange listed company, also interested does not.

A few days ago, the Board of Directors of Pakistan Oilfields sat to approve financial results for the six months ended December 31, 2003. POL being an active stock, analysts, traders and speculators were throwing around net profit figures and possible payout that would likely be announced.

The greater interest was naturally in the latter. For the corresponding period last year, the company had disbursed interim cash dividend at Rs10 per share and it was to be seen if the board would stick to that.

The company announced healthy financial results and the price of the share in POL shot up to around Rs207. Then some minutes later, the shareholders in POL skipped a few heart beats as the company announced that it was skipping the interim dividend.

It was quite unexpected for the company had been paying interim cash dividends for all of the preceding years since 1997; the company had omitted an interim payout just once in 1999. The news naturally was greeted with a cool investor response and the share in the company closed at its lower circuit breaker of Rs201.50.

Did the insiders make money in the 10-15 minutes between the announcement of financial figures and the announcement of an unexpected nil dividend? But the recent classic case appears to be that of Hubco.

On Wednesday, April 21, an announcement by Hubco stated: "We advice that one unit 4 tripped on April 18 at 9:33 pm due to activation of Generation Stator Earth Protection Circuit".

The announcement was not made on Monday nor on Tuesday, but the price of the share dropped sharply from Rs38.60 to Rs37.80 to Rs37 and to Rs 36.50 by Wednesday, when the announcement came.

Fall of Rs2, may look insignificant, but on one of the two highest volume leaders, the money made by those who had the information and lost by small investors who had no recourse to such inside information, must be enormous.

A major stock trader admitted that the problem had since soured investors' sentiment, who were fearing insurance-cover related issues. Market rumours suggested that the company might have to book one-time loss between Re0.10 to Re1. What made the company withhold the material information for three days, ought to be investigated.

And the corporate watchdog would certainly put in their best foot forward to investigate the cases. On November 20, 2002, eighteen minutes before the close of the market a fax message, purporting to have originated from Hubco was received addressed to the General Manager, KSE, announcing... "We are pleased to inform you that the lenders have approved the company's request for payment of final dividend.

Kindly inform the members of your exchange accordingly". After 15 minutes of trading that day and the whole of the next day, the company announced that the fax was a fraud.

Was money made and lost between the time of announcement and the denial? Everyone breathed a sign of relief when the investigation by the corporate regulator-a report of which was released many months later-confirmed that all was well and that no one had made any significant gains from the Hubco's false fax.