Capital market: Defaults continue as long as companies pay the fine

There should be yellow and red cards in line with FIFA philosophy.

Iqbal Ismail August 10, 2014

KARACHI: I knew nothing about football and was not interested in any sport but cricket but Fifa and its philosophy enchanted me. Fifa says and promises to banish racism from the world of football.

I knew at once that this was not going to be possible in Pakistan. To banish racism is to deny the essential realities of Pakistan where each group, each political party and each neighbourhood is based on race. Here elections are conducted only on the basis of “biradari”, but the Fifa philosophy won me over.

I watched each and every match, replays of course because the timing was awkward. The matches were scheduled at taraveeh time and I used to come home and watch the highlights.

Even before the tournament was scheduled we knew that Argentina would be a force to reckon with because of Messi. But we did not take into consideration the Germans’ steel. In the end, Germany sent Messi packing. The Germans were too good for France.

They were too good for Brazil and compelled the café Rio to shut down. Imagine being destroyed seven goals to one. It is massacre and Brazil could just look on and wonder why their aggressive intentions were so cruelly repulsed.

It is the age of German dominance; Angela Merkel was there to claim the trophy on behalf of Germany. All countries particularly the United States have now to take into account how Germany feels. Nowhere is this more apparent than Germans’ refusal to accept anything less than sacrifice by other nations to earn Germany’s support.

Countries have been destroyed, particularly Greece, but Germany will not yield. There is a price for its support and the price will have to be paid. Never mind if the rest of the world starves. The stern school master firmly believes in the adage, “spare the rod and spoil the child.”

This, however, takes me away from the main thrust of my argument – the Fifa philosophy and administration. Imagine what a blessing it must be for the game that the regulator is on the ground with neutral umpires handing out penalties for misbehaviour. There are yellow cards and red cards. One is either banned for the next game or banned from further participation in the tournament.

And what one should say about the modern day Dracula who bites. Regulate please on the spot! No committees, nothing. No inquiries. Get rid of the Draculas instantly. There is no room for those who bite.

Compare this with the behaviour and approach of Pakistan’s capital market regulator. “You have defaulted,” it says to the culprit, “we will make inquiries and we will fine you.”

Of what good are these fines? It is as if the regulator were saying, “So long as you can pay. We have no problem. Continue with your default.”

And here is the crowning glory of the regulation. We have defaulters’ list where companies are posted and can survive forever if they continue to pay the fines and keep their status alive.

In March 2011, the Securities and Exchange Commission of Pakistan (SECP) had decided to take penal action against defaulter companies, a list of more than 12,000. The companies were placed on the SECP’s website. Amnesty and an easy exit scheme were promised.

We have not been informed about the progress. There has been some news, some feedback, strike-off list. But what is the purpose? Nothing will be achieved. People will just walk off. But the real issue, the one that is beyond comprehension, is the defaulters list maintained by the Karachi Stock Exchange (KSE). How vividly I remember protesting against this list, which meant that companies could stay alive forever if they just paid the fines.

Why would KSE have tolerated this aberration? It is quite simple, some day, the big boys would acquire these companies. They will rectify the defaults and voila! a coup would have successfully executed.

For a very long time, I have held the view that if something that is desirable is not happening it is because somebody has a vested interest in not letting it happen. The amount of abuse that I have had to endure at the KSE for these views still hurts. Those who tell the truth will always be punished.

The writer is the chairman of Ace Securities

Published in The Express Tribune, August 11th, 2014.

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