Insider trading in Azgard 9: SECP rebuts TIP allegations

Published: May 24, 2013

The letter complains that the SECP had not moved against 15 companies. DESIGN: FAIZAN DAWOOD

The letter complains that the SECP had not moved against 15 companies. DESIGN: FAIZAN DAWOOD
Transparency International Pakistan. PHOTO: FILE
KARACHI: 

The Securities and Exchange Commission of Pakistan (SECP) has refuted the allegation made by the Transparency International Pakistan (TIP) in its letter to the chief justice of Pakistan regarding the issue of insider trading in Azgard 9.

These allegations appear to be motivated by mala fide intentions or a result of lack of knowledge of the intricacies involved in the issue at hand, says an SECP statement.

The TIP letter gives the false impression that the SECP has been lax in prosecuting the guilty individuals and institutions. The TIP has been less than honest because it has ignored the fact that the SECP had already explained its position to the TIP through a letter, the statement said.

The TIP letter contains hearsay information and this violates its very own objectives. The truth is that the SECP discharges its functions and responsibilities in accordance with the law, rules and regulation. When it comes to preventing, detecting, deterring and punishing financial malfeasance, the SECP has devised the procedures, internal mechanism and the power for filing a criminal complaint.

The SECP, nonetheless, has to ensure that all technical and legal aspects are taken into consideration in terms of substantiating the case in the courts, as the onus of proof lies on the prosecution.

The TIP’s letter acknowledges the fact the SECP had initiated action by filing a criminal complaint against 23 companies and individuals. The letter complains that the SECP had not moved against 15 companies. The SECP would like to clarify that before filing any criminal case, it has to make sure that the evidence is strong enough to secure a conviction.

The documents pertaining to the investigation report were reviewed by an external counsel. The objective was to prepare a substantiated complaint, backed up by sufficient evidence, because anything merely based on an opinion or presumption would not secure a conviction, SECP said in its statement.

The counsel was of the view that if the investigation report in its present form was transformed into a complaint, it would be difficult to secure a conviction. In fact, the conclusion of the trial would be a remote possibility, the learned counsel had further argued, the statement said.

Being a responsible organisation, the SECP has to ensure that it has satisfied all the legal requirements before taking any stern action, such as filing of criminal complaints, because a half-baked attempt might damage the reputation of the relevant businesses, it said.

The SECP’s internal team and external counsel undertook an extensive review of the evidence. A list of persons to be proceeded against criminally, based on the gist of available evidence against them, was recommended to the SECP. The SECP granted approval to the companies/individuals to be prosecuted in the matter.

Now the matter is sub judice. It is also pertinent to mention here that JS Investment has filed a constitutional petition No D 1985 of 2013 in the Sindh High Court, which has since suspended the proceedings in the trial court. The SECP is contesting the matter.

With specific reference to charges made against Mr Zafar Abdullah, an SECP commissioner, the SECP would like to clarify that Mr Abdullah was never the CEO of Crosby Dragon Fund (CDF) or its Asset Management Company (AMC).  As matter of fact, Abdullah was the CEO of Crosby Securities Pakistan (Private) Limited (CSPL), a licensed corporate brokerage house, which was completely independent and separate from CDF and Crosby AMC in terms of the board of directors and the management. Moreover, in terms of the relevant statute and the regulatory framework thereof, a corporate brokerage house and an asset management company and its funds should have separate and independent respective management and boards of directors and Crosby Brokerage House and Crosby AMC were compliant with these statutory conditions.

It may further be noted that Abdullah had joined the CSPL on February 15, 2008, and it had started commercial operations on May 29, 2008, whereas in ANL manipulation case, the second review period was also over in early April 2008. Thus, CSPL, the brokerage house, headed by Abdullah, had neither indulged in any direct or indirect trading of ANL shares nor it had any connection with Crosby AMC or Crosby Dragon Fund.

Furthermore, it is relevant to state the factual position, that the name of the Crosby Dragon Fund was excluded from the list of the accused by the SECP on October 20, 2011, whereas Abdullah joined the Commission on August 17, 2012.

Published in The Express Tribune, May 24th, 2013.

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