SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN€¦ ·  · 2016-05-12SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN ... The SEC and State Bank of Pakistan (SBP) have signed a Memorandum

SECURITIES AND EXCHANGECOMMISSION OF PAKISTAN

NEWSLETTER Volume III, Issue III July—September, 2003

Dr. Tariq Hassan Appointed Chairman SEC

Message from the ChairmanI am grateful at the opportunity to lead a dynamic and proficientregulatory institution with the mission of developing a fair,efficient and transparent regulatory framework aimed atfostering growth of a robust corporate sector and broadbased capital market. In a short span of just over fouryears, the SEC has introduced a plethora of reforms whichhave not only resulted in a much improved and efficientcapital market and non-bank financial sector in Pakistan,but has also built up its reputation as a strong and proactiveregulator. I hope to build up on the good work alreadyachieved and to take the SEC to even higher levels ofprofessionalism, efficiency and productivity.

At the outset, I would like to express my profound gratitudeand appreciation to my predecessors Mr. Khalid A. Mirzaand Mr. Abdul Rehman Qureshi whose ardent commitment,devotion and support have placed the SEC on a soundfooting to achieve its mission. It has been over a monthnow since I was appointed as Chairman of the SEC and Iwould like to share with you my vision for the SEC and thecapital market.

The Commission’s strategy to fulfill its mission is based onfive broad principles: (i) a consultative rule-making process;(ii) facilitation of compliance with corporate and securitieslaws; (iii) rationalization of regulation i.e. make regulationmore cost effective; (iv) strict administration,implementation and enforcement of corporate and securitieslaws; and (v) holistic regulation of the financial sector in closeco-ordination with the State Bank of Pakistan. Theimplementation of this strategy will enable the SEC topursue its objectives with greater effectiveness, consistency,vigour and steadfastness.

I would also like to take this opportunity to appreciate theSEC staff whose dedication and hard work are amply reflectedby its achievements.

SEC and SBP Sign MoU

The SEC and State Bank of Pakistan (SBP) have signeda Memorandum of Understanding (MoU) with a viewto develop a fair, efficient and transparent money andcapital market, robust corporate sector and a dynamicbanking system compatible with best internationalpractices. In keeping with the changing global financialenvironment, the MoU, which was signed by theheads of the two institutions in Karachi in September,sets out parameters for close coordination in thesupervision of banks, development finance institutions(DFI) and non-banking finance companies (NBFC)operating in Pakistan.

According to the MoU, the SEC and SBP willshare information and work towards the holisticdevelopment of the financial sector.

The two regulators have agreed to provide each othernecessary information for the grant of

Regulatory Action Against IllegalBrokerage Houses

Earlier this year, the SEC received several complaintsregarding companies, funds and individuals claiming tobe agents of international brokerage houses. Thesebusinesses, purportedly dealing in securities, wereinvolved in soliciting deposits in foreign exchangefrom the public and utilizing them in variousinvestments through principals outside the territorialjurisdiction of Pakistan. The types of investments beingadvertised and offered include securities, currencytrading, futures currency trading, money markets,securities’ index trading, commodity futures, options,bonds, etc. It was reported that the public wasmotivated to make investments mainly in internationalcurrencies and commodities through the internet.

The SEC placed advertisements in newspapers to warnthe public about illegal activities of these so-called

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On 18 August 2003, the Government of Pakistan appointed Dr. Tariq Hassan as Chairmanof the Securities and Exchange Commission of Pakistan (SEC). Prior to his appointment asChairman, SEC, Dr. Hassan was the Adviser to the Federal Minister for Finance and EconomicAffairs on matters pertaining to law and economics/finance for four years. He has also been theadvisor to the Governor, State Bank of Pakistan (SBP) on banking law matters.

Dr. Hassan has extensive experience of corporate and capital market reforms during his 28years career spanning private corporate law practice and development law work in internationalfinancial institutions and with the Government of Pakistan. He has worked in Pakistan, USA, Italyand UK in both private and public sectors as an advocate, consultant, adviser and educationist.

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Reorganization at the SEC

In September, to enhance the operational efficiency andcoordination amongst its various Divisions, the SEC wasre-organized into the following five Divisions andDepartments headed by each of the Commissioners.

• The Company Law Division headed by Mr. AbdulRehman Qureshi comprises the Registration Departmentand the Enforcement Department.

• The securities Market Division headed by Mr. ShahidGhaffar comprises the Self-Regulatory OrganizationsDepartment and the Securities Department.

• The Specialized Companies Division headed by Mr. EtratRizvi comprises the NBFC Department and the InsuranceDepartment.

• The Professional Services and Policy Division headedby Mr. Zafar ul Haq Hijazi comprises the ProfessionalServices Department and the Policy Department.

• The Support Services Division also headed bvy Mr. Zafarul Haq Hijazi comprises the Administration Departmentand the Finance Department.

Furthermore, the Chairman’s Secretariat, headed by theExecutive Director, has also been re-organized into theExternal and Internal Wings, each headed by a Director.

IOSCO EMC Advisory Board Meeting

As an active member of the International Organization ofSecurities Commissions (IOSCO), the SEC is a member ofIOSCO’s Emerging Market Committee (EMC), EMCAdvisory Board, Asia Pacific Regional Committee (APRC),EMC Working Group (WG) – 2, in addition to being theChairman of WG – 3 of the EMC.

The EMC Advisory Board meeting was held in Athens,Greece in September. During the meeting, the SecretaryGeneral of IOSCO reported that 22 jurisdictions had becomesignatories to the IOSCO MOU. He further informed thatin order to encourage EMC members to become signatoriesto the IOSCO MOU, the Secretariat was working on anassistance programme framework relating to the MOU.

A report by the Task Force for Assessing Implementationof the IOSCO Objectives and Principles of SecuritiesRegulation was also presented to the EMC Advisory Boardduring the course of the meeting. The EMC Advisory Boardendorsed the report and decided to support its use followingits approval by the Executive Committee and adoption bythe President’s Committee. The Board also reviewed thereports of WG-1, WG-2, WG-3, WG-4 and WG-5.

Dr. Tariq Hassan, Chairman, SEC, being Chairman of theWG-3 reported to the EMC Advisory Board that WG-3 hadno specific mandate since last year. He further informed thatthe SEC was planning to present a working paper on a

possible new mandate for WG-3 for consideration in theWG-3 meeting scheduled in Seoul, Korea. In this connection,proposals for new mandates had been received which wereunder study.

Chairman SEC further informed the Board that he hadrequested EMC members to indicate their desire to join themembership of WG-3 as members or observers. He assuredthat a new list of WG-3 would shortly be provided to ChairmanEMC and Secretary General IOSCO. Dr. Hassan also briefedthe Board about the activities of the IOSCO StandingCommittee-3.

Dubai Investment Conference

The Karachi Stock Exchange (KSE) and Euromoney co-hosted a discussion panel titled “Pakistan—InvestmentDestination” in Dubai in September. Mr. Shaukat Aziz,Pakistan’s Federal Minister for Finance and Economic Affairs,opened the session with his keynote address. He saidthat the role of the government has been reduced topolicy making and independent regulators are in place toprotect the interests of all stakeholders.

He further added that Pakistan now has a professional anda no-nonsense approach to tackling economic issues. Itoffers an open and market based economy and is as goodas any other place for the investor. “Yes, you will faceproblems in Pakistan but the investor will have easy accessto the top to resolve them. We are in a state of transitionand would like the system to respond to these problems.We are firmly committed to these reforms”, he said.

Dr. Tariq Hassan, Chairman, SEC said, “The unprecedentedboom in Pakistan’s equity market during the past year wasundoubtedly due to the recent reforms particularly theextensive financial sector reforms, introduced by thegovernment, which have resulted in macro-economicstability and economic growth. The robust economiclegislative agenda provides for a modern legal framework,with particular focus on protection of investment, particularlyforeign investment, and a new tax regime. Judicial reforms,including arbitration reforms are underway. An overallpolicy of deregulation has been adopted which has led torationalized procedures and decreased governmentintervention. Further, in line with the deregulation policy,autonomy has been granted to regulatory institutions suchas the SEC and SBP and a liberal policy framework forprivatization and private sector development has beenformulated, which are expected to broaden and deepen thecapital market.”

“The SEC is continuously striving to raise standards andprotect market integrity by ensuring a fair, efficient,transparent and vibrant capital market for all stakeholders.In order to deepen the market, stimulate investment andengender investor confidence, effective implementationof reforms should continue”, he added.

Delegates at the panel discussion included bankers, fundmanagers as well as individual investors.

Seminar on Internal Audit Arranged by ICMAP

The Institute of Cost and Management Accountants ofPakistan (ICMAP) arranged a seminar on “Internal Audit—Current Best Practices” in Islamabad in September. Dr.Tariq Hassan, Chairman, SEC, who was chief guest at theseminar said that; “At a time when the business community,their advisers and regulators are looking for preventivemeasures to avoid corporate collapses, a strong,independent internal audit function, which performs itsfunctions in an objective manner, is the solution along withstrengthening the governance procedure.”

Dr. Hassan appreciated the Institute’s effort to highlightthe internal audit function as one of the most crucialissues faced by the business community. He said that;“Internal auditing needs to be an independent andautonomous activity and must be performed in an objectivemanner. An internal auditor acts like the conscience of theentity. Unlike the external auditor, who only gets a chanceonce a year to review the business, operations and financialstatements of its client or a regulatory authority which canmonitor and regulate an entity on the basis of periodicstatements it receives, an internal auditor is in a muchbetter position to monitor and review the business processes,operations, financial statements and associated risks on acontinuing basis.”

Participation in ITCN Asia 2003

In keeping with past years, the SEC participated in theITCN Asia 2003 Exhibition in Karachi in August. This year,the SEC projected the strategic advantages andefficiencies that can be attained through InformationTechnology in the corporate sector. It provided service tothe corporate sector through the following activities at theExhibition:

• Establishment of a fast track company incorporationdesk to facilitate instant incorporation of companies;

• On-line facility to lodge complaints, suggestions,comments or queries pertaining to securities market,specialized companies and insurance companies withinstant response from officials at the SEC head officein Islamabad; and

• E n c o u r a g e / f a c i l i t a t einvestors, both local andforeign, by providing themassistance for companyincorporation and otherr e l a t e d r e g u l a t o r yrequirements.

The SEC’s participation in the ITCNexhibition since the last few yearshas been appreciated by local aswell as foreign delegates visitingthe exhibition. A number ofcompanies have been registeredthrough the fast track companyincorporation desk in the past years.

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Takaful Seminar

In September, the International Islamic Universityorganized a two-day seminar on “Islamization ofInsurance System in Pakistan” at the National Institute ofBanking and Finance (NIBAF) in Islamabad. Scholars fromwithin the country and abroad, officers of the insurancedepartment of SEC and senior executives of the insurancecompanies attended the seminar. Dr. Tariq Hassan,Chairman, SEC in his address to the participants of theseminar said that he was keen to see Takaful (IslamicInsurance) business develop in the country to provide analternative product for which there was growing demand.He mentioned that the first Takaful company has alreadybeen allowed to incorporate and necessary registrationrequirements under the Insurance Ordinance, 2000 werebeing completed by the company.

Mr. Etrat Hussain Rizvi, Commissioner, SEC in his addresssaid that the opportunities and potential for Takaful areenormous and a consensus was necessary on the typesof Takaful models to be followed, disclosure requirements,creation of specific reserves, distribution of surplus tothe participants and retakaful arrangements. He cautionedthat conventional insurance companies needed eight to tenyears to break even, therefore those who planned to undertakeTakaful business would need to be patient.

Takaful, an Arabic word meaning, “guaranteeing eachother”, is in essence the same as insurance but is approvedunder Islamic jurisprudence or Shariah guidelines. It differsfrom conventional insurance system as it focuses onparticipants instead of policyholders, contributions insteadof premiums, and donations instead of payments. TheTakaful system is based on mutual help through theco-operative social principles of Shariah. The very fact thatit offers insurance to the people out of a pool of fundsthat is jointly owned by them and is jointly distributedamongst them, when and if there is surplus, eliminates anyelements of gambling and exploitation from the insuranceequation. Not only do policyholders and shareholders havea clear demarcation, but the former risk their capital (i.e.their premiums) and are rewarded through share of surplus.

April—June 2003 July—September 2003

KSE 100 Index 3402.5 as on June 30 4027.34 as on September 30

Market Capitalization Rs. 755.8 billion on June Rs. 887.60 billion as on September

Average Daily Traded Value Rs. 10.2 billion Rs. 26.69 billion

Average Daily Turnover 265 million shares 493.995 million shares

Term Finance Certificates 3 issues 2 issues

Total amount offered in TFCs Rs. 1 billion Rs. 1.320 billion

Equity Issues 1 issue 1 issue

Initial Public Offerings (Equity) Rs. 0.720 billion Rs. 0.638 billion

Total Public Offering Rs. 1.720 billion Rs. 1.958 billion

Quarterly Stock Market Indicators

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that, in some cases, resulted in filing of disputedreturns by different directors. Now, the amendmentshave been made to eliminate possible disputes overauthenticity of returns submitted by companies and ithas been provided that the returns shall only be signedand submitted by the chief executive or the secretaryof a company.

The amendments have been notified in the official Gazettevide SRO 687 (1)/ 2003 dated 7 July, 2003, and have alsobeen placed, with download facility, on the SEC website.

Companies Registration Office Regulations

With a view to facilitate companies in timely compliancewith statutory requirements as well as improve the documentmanagement and boost efficient internal working of theCROs, the SEC has framed new Companies (RegistrationOffices) Regulations, 2003, substituting the Companies(Registration Offices) Regulations, 1986. These Regulationsshall eradicate redundant manual work at CROs especiallywith respect to maintenance of various registers.

Some of the major reforms introduced with a view to pursuestatutory compliance in the corporate sector are as under:

• Time period for examination of documents, applicationsetc.

In the past, no time period was defined for theRegistrar concerned to examine, or cause to beexamined, the documents received in a CRO. Toinculcate a culture of quick dispensation, the 2003Regulations have specifically defined the quickestpossible time in which the Registrar concernedwould examine the documents or applications filedand in case of delay, reasons and circumstances causingthe delay shall be recorded. Most of the applicationsand statutory returns would be disposed, registered orrecorded within one day. However, certificates ofcommencement of business, registration of a foreigncompany and incorporation of a company shall beissued within a period of two and three days respectively,while inspection of documents kept by the Registrarwould be carried out within an hour.

• Payment of additional fee for late filing of documents

The documents filed late with a CRO, i.e. after theprescribed period, were accepted for record, withoutabsolving any liability, arising out of default, of paymentof three times filing fee in addition to normal filing fee.To encourage companies to comply with the statutoryrequirements, an incentive of lower additional filingfee slabs has been provided. Documents filed withdelay not exceeding fifteen days would be charged withan additional fee equal to the usual fee specified in theSixth Schedule. In case of documents filed with a delayof more than fifteen days but less than forty-five daysand a delay exceeding forty-five days, an additionalfee equal to two times and three times of the usualfee respectively, would be charged.

Amendments in the Companies (GeneralProvisions and Forms) Rules, 1985

The SEC has simplified the formats of statutory returnsprescribed in the Companies (General Provisions and Forms)Rules, 1985 for the convenience of companies incorporatedunder the Companies Ordinance, 1984. The returns areused by companies for making applications and submissionof returns to SEC and the Company Registration Offices(CRO).

Now, the forms relating to statutory returns have beencompletely revamped and designed considering theInformation Technology solutions and the automationalready adopted by the SEC and also for the purpose ofonline submission system, targeted for the near future. Itis hoped that the new set of forms retrieval of requisiteinformation from the database.

Some of the major reforms introduced through amendmentsin the Rules are as under:

• Mode of serving notices/documents

In the past, corporate entitles were allowed to sendreports/notices/documents to their members utilizingonly traditional modes of sending mails i.e. either throughregistered post or under a certificate of posting. Therewas an overwhelming demand from the corporatesector that considering the convenience andpromptness of courier service, utilization of this serviceshould be given legal cover for company communicationwith its shareholders. The amendments in the Rulesnow allow usage of courier facility in addition totraditional postal mail.

• Documents submitted with application for alteration inmemorandum

Keeping in view the practical difficulties of thecorporate sector, amendments have been made in theRules to simplify, rationalize and streamline theinformation/documents to be furnished along withapplication for alteration in memorandum.

• Company representatives in proceedings beforethe SEC

Prior to these amendments in the Rules, only a charteredaccountant, cost and management accountant or anadvocate practicing at the level of High Court/SupremeCourt could appear on behalf of the company inproceedings before the SEC. The amendments havebroadened the scope of representation and now thechief executive, company secretary and other personpossessing the qualification prescribed by the SEC canappear on behalf of the company in proceedingsbefore it.

• Signatories on returns submitted with the SEC

Previously, any director of the company was eligible tosign the returns filed by the companies with the SEC

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Appellate Bench Rules

During the quarter, the SEC notified the rules for filingan appeal with the Appellate Bench of the Commissionagainst any order of the SEC or of an Executive Director ofthe SEC.

The SEC having quasi judicial powers makesorders/decisions under the relevant corporate laws. Suchpowers have been delegated to individualCommissioners/Executive Directors. The law providesthat appeal against any order of a Commissioner or anExecutive Director lies with the Appellate Bench of theCommission constituted under the Securities and ExchangeCommission of Pakistan Act, 1997. In this regard, the SEChas, with the approval of Federal Government, notifiedrules vide S.R.O. 734(I)/2003 dated 25 August, 2003 calledthe Securities and Exchange Commission of Pakistan(Appellate Bench Procedure) Rules, 2003.

The rules mainly prescribe the following procedure:

1. Every appeal shall be filed within a period of thirtydays from the date on which the relevant order hasbeen received by the appellant.

2. Memorandum of appeal shall be presented to theRegistrar of Appellate Benches in the form prescribedin Schedules to the Rules.

3. The Appellate Bench may hold its sittings in the HeadOffice of the SEC at Islamabad or at any of the RegionalOffices of the SEC.

4. The proceedings of the Appellate Bench shall beconducted in English or Urdu.

5. The Registrar may communicate the defects in theappeal, if any, to the appellant and allow him a suitabletime to rectify the defect.

6. Every memorandum of appeal shall be accompaniedwith bank challan/bank draft, evidencing payment offee amounting to Rs. 500.

7. If on the day fixed for hearing, the appellant does notappear, the Appellate Bench may make an order thatthe appeal be dismissed.

8. The Registrar shall notify the date, time and venue ofhearing of the appeal to all the parties.

9. The appellant shall be heard by the Benchpersonally or through his/her authorizedrepresentative, in support of the appeal. Similarly theBench shall hear the respondent or his/her authorizedrepresentative against the appeal.

10. Every order of the Appellate Bench shall be signed anddated by the Commissioners comprising the Bench.

11. A copy of the duly signed order passed by the AppellateBench shall be communicated to all the parties.

12. A fee of Rs. 200 shall be charged for inspecting therecords relating to pleading of parties, available withthe Registrar.

Quarterly and Half-Yearly Accounts forInsurance Companies Notified

Under Section 245 of the Companies Ordinance, 1984,all listed non-life insurance companies have to prepare andreport quarterly results. Previously, there were no speciallyprescribed formats for insurance companies, hence theywere reporting the same manner as other listed companies.In order to facilitate proper disclosure and presentation,the SEC has notified the format to be used by all non-lifeinsurance companies for reporting of their quarterly andhalf-yearly accounts to the shareholders, the SEC as well asthe general public.

Quarterly and half-yearly accounts were required to complywith International Accounting Standard (IAS) – 34 “interimreporting” and should disclose the results for the interimperiod and aggregate for the period (i.e. in this case for sixmonths). Furthermore, auditors have to review half yearlyfinancial statements and report on the half yearly resultsunder the code of corporate governance.

All non-life insurance companies are required to preparethe quarterly/half yearly accounts for the period ended onor after 30 June, 2003 on these new formats. Companieswhich had finalized their accounts before the issuance ofthe circular, were not required to prepare the accounts forthe period ended 30 June, 2003 on these formats. Thesecompanies would be required to follow these formatsw.e.f. the quarter ending 30 September, 2003.

Study Trip to Thailand and Australia

Five officers of the SEC—Mr. Tahir Mahmood, AdditionalRegistrar; Mr. Imran Bashir, Director; Ms. Farah Qamar, JointDirector; Mr. Usman Hayat, Director; and Ms. SabahatBaloch, Assistant Director— visited key regulatory bodieswhile on a study tour of Thailand and Australia.

The purpose of the study tour, which was sponsored bythe Asian Development Bank, was to study corporategovernance practices prevalent in these countries. Duringthe course of the study trip, officers of the SEC metrepresentatives of the Securities and Exchange Commissionof Thailand, the Stock Exchange of Thailand, the Instituteof Directors, Thai Rating and Information Services Co.Limited, Australian Securities and Investment Commission,and the Australian Stock Exchange. While discussing areasof utual concern, SEC officials learned of the initiativesthese countries, particularly their Securities Commissionswere taking for the development of corporate governanceand educating stakeholders of its implications.

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Eighth Coordination Committee Meetingbetween SEC and SBP

The Eighth Coordination Committee Meeting of the SECand SBP was held at the SEC head office in Islamabad inAugust and was attended by senior officials from bothinstitutions.

relevant rules and regulations and institutional strengtheningwould be the major area of focus for the SEC Elaboratingthe future agenda of the SEC, Dr. Tariq Hassan, Chairman,said that effective enforcement of as it embarks upon a newera of sustainable development for the capital market andcorporate sector in Pakistan. He assured Dr. Ishrat Hussain,Governor, SBP of SEC’s continued cooperation with SBPin building a strong regulatory framework within the country.He said that the SEC had come a long way since itsinception in 1999 and he would continue the process oftransforming it into a professional and independent regulator.

Chairman SEC further said that the regulatory objectives ofthe two institutions could only be met through a consultativeprocess with all stakeholders and he intended to adopt aparticipatory approach in fulfilling the mandate of the SEC.SEC would continue to facilitate investors by promotingan efficient and transparent capital market and corporatesector and engendering confidence and faith in the integrityof the market.

Governor SBP congratulated the Chairman and assured theSEC of continued cooperation and facilitation from the SBP.He hoped that the SEC would continue to be an effectiveand efficient regulator under the Chairmanship of Dr. Hassan.

The main areas of discussion at the meeting included theongoing proceedings against a number of non-regulatedbrokerage businesses and monitoring of non-bank primarydealers. On the issue of non-take advantage of thedivision of regulatory authority between the SEC andSBP and that the two regulated brokerage business, thetwo regulators agreed that many players in the marketwere trying to institutions should continue to work togetherto ensure that a comprehensive regulatory framework wasin place. It was also decided that SEC and SBP wouldmake joint efforts to create awareness amongst the publicregarding the legal position of investments with suchindividuals/companies.

The SEC-SBP Coordination Committee meetings are heldonce every quarter to supplement the on-going regularcoordination between the two regulators.

authorisation; assist each other by verifying or supplementingany information submitted by or to any bank/DFI/NBFC,and keep themselves informed from time to time aboutthe nature of their regulatory system and the manner andextent to which they would like to conduct consolidatedsupervision over any group of banks/financial institutionshaving common management and ownership control.

About the ongoing supervision of banks/DFIs/NBFCs, theSEC and SBP have agreed to provide, on request, relevantinformation on material developments or supervisoryconcerns in respect of the operations of a financial institutionand respond to requests for information on regulatory systemsand inform each other about significant changes,particularly those, which have a material bearing onthe activities of a bank/DFI/NBFC.

SEC and SBP Sign MoU....cont. from page 1

The eighth Coordination Committee Meeting of the SEC-SBP in progressat the SEC head office in Islamabad in August.

Dr. Tariq Hassan, Chairman, SEC and Dr. Ishrat Hussain, Governor,SBP signing an MoU which sets out parameters for close coordination

in the supervision of banks, DFIs and NBFCs operating in Pakistan.

A delegation of the International Finance Corporation (IFC)visited the SEC in September and met with the Chairman.

Comments, queries and suggestions about this

newsletter may please be addressed to:

Media and Publication Unit, SEC NIC Building, 63-

Jinnah Avenue, Blue Area

Islamabad, Pakistan

Ph. +92-51-9218593, 9207091-3

Fax: +92-51-9205692

Email: [email protected]

www.secp.gov.pk

IFC Delegation Visits SEC

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the following officers as contact persons in case of complaintsand queries:

Syed Fayyaz Mahmud Mr. Amjad IqbalDirector Assistant DirectorProfessional Services and Policy Banking PolicyDepartment DepartmentSecurities and Exchange State Bank of PakistanCommission of Pakistan I.I. Chundrigar Road,NIC Building, Jinnah Avenue KarachiBlue Area, Islamabad Email:E-mail: [email protected]@secp.gov.pk Tel. No. 021-24450-3550Tel. No. 051-9207648 Fax No. 021-9212506Fax No. 021-9218591

Chairman National Accountability Bureau (NAB) Lt. GeneralMunir Hafiez visited the SEC head office and met Dr. TariqHassan, Chairman SEC and senior officials of theCommission. The two institutions have resolved to workin close coordination and liaise on the ongoing actionagainst brokerage and forex companies carrying on illegal,unauthorized and fraudulent activities.

A detailed presentation was made to the visitingdelegation about the SEC’s transformation into atransparent, efficient and independent regulator of thecapital market and corporate sector. Four main areas offocus were highlighted which were of mutual concernto the two organizations including transparency issues,accountability, anti-money laundering and anti-corruptioninitiatives.

Chairman SEC informed Chairman NAB that SEC and SBPwere actively taking action against fraudulent forex andbrokerage companies and expressed hope that NAB wouldalso play an active role in netting individuals and firmsinvolved in these illegal activities. The collaboration amongthese institutions would ensure that irrespective of the formof organization or business activity, no one would escapethe ambit of law.

Chairman NAB expressed his appreciation for theCommission’s proactive role in enhancing transparency andcommitment to combat financial crimes. He assured ChairmanSEC of NAB’s cooperation, particularly in the case of illegalbrokerage firms and individuals.

Regulatory Action Against IllegalBrokerage Houses

....cont. from page 1

From left: Dr. Tariq Hassan, Chairman, SEC and Lt. GeneralMunir Hafiez, Chairman, NAB in a meeting during the latter’s

visit to SEC head office in Islamabad.

brokerage houses. A quick survey was also conducted inmajor cities, notably Lahore, Multan and Karachi, to detectsuch unscrupulous parties and have first hand knowledge oftheir modus operandi. Investigations by the SEC establishedthat not only were these brokerage houses accepting depositsfrom investors on the promise of exorbitant rate of profit,but they were documenting the investment in such a mannerthat on an overall basis the amount would be declared lostin transactions within a few months.

The SEC initiated action against these brokerage housesunder the Companies Ordinance, 1984 and the Securitiesand Exchange Ordinance, 1969 and prohibitory orderswere issued asking them to stop brokerage business anddeposit taking. Besides the administrative action, windingup proceedings were initiated in the High Courts againstthe following companies:

M/s. Bulls & Bears (Private) Ltd.

M/s. Offshore Global Management (Private) Ltd.

M/s. World Business Consultants (Private) Ltd.

M/s. United Brokerage Consultants (Private) Ltd.

M/s. Forex Services International (Private) Ltd.

M/s. Trade Stations Securities (Private) Ltd.

M/s. Rouf International Advisory Services (Private) Ltd.

M/s. Harvest International (Private) Ltd.

M/s. Pindex (Private) Ltd.

M/s. Tycoon International (Private) Ltd.

M/s. Fidelity Future Management (Private) Ltd.

M/s. Exchanger Impex (Private) Limited.

M/s. White House Securities (Private) Ltd.

M/s. Wall Street Securities (Private) Ltd.

Having regard to the fraudulent activities of these companies,the Lahore High Court has frozen the bank accounts of 12companies and their directors in addition to placing thenames of directors on exit control list. To facilitate investorsthe Court has, however, relaxed the restrictions on bankaccounts to the extent of making refunds to investors. TheSindh High Court has also admitted the petitions filed in thatCourt. The official assignee is looking into the cases underinstructions of the Court.

The SEC and SBP have also constituted a task force to helpthe complainants and synchronize action against these illegalbrokerage houses. A meeting of the task force was held atthe SEC head office in Islamabad in September. The meeting,which was chaired by Dr. Tariq Hassan, Chairman, SEC, wasalso attended by lawyers engaged for these cases. It wasdecided that all the cases would be pursued with full forceand vigor and that there would be no relaxation for thoseconducting illegal and unlawful business and fleecing the

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Sixth Annual Meeting of APG

Mr. Ashraf Tiwana, Deputy Director, represented the SEC at the Sixth AnnualMeeting of Asia/Pacific Group in Macau, China in September. Representativesfrom 26 jurisdictions from the Asia-Pacific region provided a useful opportunityto meet and interact with these representatives as well as learn about themoney laundering and terrorist financing initiatives being taken by them intheir respective jurisdictions. The Annual Meeting was preceded by an AnnualForum on Technical Assistance and Training. The forum is a high level ConsultativeGroup comprising donor and provider organisations and member jurisdictions.In addition, several one-to-one meetings were held with representativesof the donor agencies to understand the kind of assistance these agenciesoffer to members on money laundering related issues.

Seminar on Corruption and Money Launderinghosted by UNODC

Representatives of the AML Cell, along with the departmental coordinators,attended a one-day seminar on “The International Response to Corruption andMoney Laundering” organized by the United Nations AML and counter-financingof terrorism by Mr. Khawar Qureshi, Barrister (commercial and public lawOffice of Drugs and Crime (UNODC) in Islamabad in August. The seminarconsisted of a presentation on expert) and the UNODC Special Advisor onfinancial crime. Various regulatory bodies, including the Anti-Narcotics Force,the Federal Investigation Agency and NAB also gave presentations on similarissues.

UNODC Adviser Delivers Lecture in SEC

Mr. Khawar Qureshi, who was a visiting consultant for UNODC visited thevarious regulatory and other institutions in Pakistan. He also visited the SECand delivered a lecture on financial crime and money laundering. Mr. Qureshicommended the SEC’s recent AML initiatives for enhancing transparency inthe capital market. The AML team also held a follow up meeting with Mr.Qureshi to discuss local and international perspectives on the subject matter.

US Anti-Money Laundering School

Mr. Bilal Rasul and Mr. Abid Hussain, both Joint Directors in the SEC,attended the Anti-Money Laundering School at the Office of Comptroller ofthe Currency, Washington D.C. in September. The course was sponsored bythe US State Department/Treasury Department. The main emphasis of the coursewas on designing and implementing an appropriate customer identificationprogramme for combating the issues of money laundering and terrorist financing.The course, which was attended by 37 delegates from 28 other countries,provided an insight into the experiences of setting up anti-moneylaundering frameworks in different countries. After the course Mr. Bilal Rasulvisited the offices of the World Bank and the US Securities and ExchangeCommission and held meetings to establish linkages for the SEC’s AMLProgramme.

US Embassy Officials Visits AML Cell

Mr. Douglas Climan, Counsellor for Economic and Commercial Affairs, USEmbassy, Islamabad visited the SEC for a briefing on the AML measures. Mr.Bilal Rasul, Joint Director, SEC made a detailed presentation on the recentinitiatives of the AML Cell and its future plans. The official expressed hispleasure with the initiatives and requested sustained communication andcooperation between the SEC and the US Securities Commission.

Money Laundering—the Concept

The volume of global financialtransactions in the last two decadeshas increased exponentially, especiallyin the wake of globalization andfinancial liberalization. The abundanceof such capital has subsequently givenrise to opportunities to launder moneythrough sophisticated financial channels.

Money laundering activities haveincredibly detrimental ramifications.The activity damages the financialsector institutions that are critical foreconomic growth, reduces productivityin the economy’s real sector bydiverting resources, and encouragescrime and corruption which impedeeconomic growth. It can also distortthe economy’s external sector—international trade and capital flows—to the detriment of long-term economicdevelopment. Effective anti-moneylaundering policies, on the otherhand, reinforce a variety of goodgovernance policies that help sustaineconomic development. According toa conservative estimate, over US$1.0trillion exchange hands through illegalmeans everyday.

Today, enterprise criminals of everysort, from drug traffickers to stockfraudsters to corporate embezzlers andcommodity smugglers, launder themoney flowing from their crimes fortwo reasons. The first is that themoney trail itself can become evidenceagainst the perpetrators of the offence;the second is that the money per secan be the target of investigation andseizure.

The International Initiative againstMoney Laundering

The international agreements or treaties,which form the framework forcooperation in anti-money launderinginclude:

• The United Nations Conventionagainst Illicit Traffic in NarcoticDrugs and Psychotropic Substances,1988

• UN Security Council’s ResolutionNo. 1373 against terrorist financing

• IOSCO’s Resolution of 1992 onmoney laundering

• The Basel Statement• The 40+8 recommendations on

money laundering of the FinancialAction Task Force (FATF)

A Financial Crimes Unit (FCU) is being established at the SEC to facilitate investigations against fraudulentfinancial activities. It shallform a part of the External Wing of the Chairman’s Secretariat. The AML Initiative at the SEC shall be a part of the FCU.