KARACHI, Feb 15: The Securities and Exchange Commission of Pakistan (SECP) received 292 complaints made by small investors and 402 complaints by small shareholders against listed securities during July-June 2001-02.
According to the annual report of SECP received here on Saturday, the Investor Complaints Wing of Securities Market Division (SMD) of the Commission took action on 186 complaints, 43 were under examination, 5 complaints were pending with the stock exchanges, 58 complaints were under litigation against defaulted and suspended members.
During the year (July-June 2001-02), the Commission received 128 complaints related to Karachi Stock Exchange (KSE), 47 to Lahore Stock Exchange (LSE) and 11 pertained to Islamabad Stock Exchange (ISE).
The annual report further said that the Commission received only 135 complaints in 2000-01 and addressed 44 complaints.
Similarly, the Commission received 159 complaints from share holders in that year.
The complaints received and disposed of during the year pertained mainly to non-receipt of dividend warrants; non- encashment of dividend warrants; delay/non-transfer of shares and issues of duplicate shares; non-receipt of annual and interim accounts; and wrongful deduction of Zakat.
The Enforcement & Monitoring Division (EMD) claimed that all the complaints received from the shareholders were promptly addressed. There has been a significant improvement in investor confidence as a result of proactive and prompt actions of the Commission, the report said.
Considerable importance is attached to timely payment of dividend under the law and severe penalties like imprisonment for a term of up to two years and fine of up to Rs1 million, have been prescribed to protect the right of shareholders to receive dividend on time.
In 2001-2002 (July-June), the EMD filed prosecution applications against CEOs of two listed companies, Quality Steel Works Ltd and Fateh Textile Mills Ltd, on account of their failure to pay dividend to some of the shareholders within the prescribed time period.
In addition, the EMD received applications from three companies during the year for deferment of payment of declared dividend. The EMD, after scrutiny allowed one of the companies to withhold payment of declared dividend.
Applications of the other two companies were rejected as the law does not envisage deferment of declared dividend to all the shareholders of a company.
The EMD took a serious note of complaints received from investors regarding delay in transfer of shares and issued notices to two companies. The two complaints were disposed of and fines were imposed on the companies and their CEOs.
Report of the Commission said that EMD filed a case for prosecution of directors of Pak Fibre Industries Ltd under sections 60, 66, and 492 of the Companies Ordinance 1984. The prosecution was initiated on account of misstatements in prospectus issued by the company for raising funds from the general public.
The division identified several cases of negligence of statutory auditors who failed to act in conformity with the statutory requirements.
In the past, the Commission used to refer the cases to Institute of Chartered Accountants of Pakistan (ICAP), but due to delays by the ICAP, the Commission itself decided to proceed against them.
Exercising powers under Companies Ordinance 1984, the EMD initiated action in 25 cases against 20 firms of chartered accountants during the fiscal year 2002. Penalties were imposed in 21 cases while four cases were pending as of June 30, 2002.
The Report also revealed cases where managements abused laws for transfer of funds to their own companies. The EMD detected material deficiencies in the information provided by certain companies in the proposed resolutions and statements of material facts annexed to notices of general meetings.
Timely interference by EMD caused four companies to withdraw the proposed resolutions for making investments aggregating Rs120 million in their associated companies. In another case, a company was prevented from selling its investment in a subsidiary at a “throw away” price.
Another company was restricted to pass a resolution for making advances to associated undertakings without any return.
A number of cases were identified by the Commission where investments were either made in associated companies without approval of shareholders or in excess of the prescribed limit or free of any return. Proceedings were initiated against 15 companies for violation of the mandatory provisions of the Companies Ordinance. Of these 25 cases, only 5 were disposed of by the SECP.—APP