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Illegal forex trade: SBP, SECP task force to work out strategy

LAHORE, Sept 3: The central bank and the Securities & Exchange Commission of Pakistan (SECP), the two federal regulators of the financial sector, have set up a joint task force whose mandate includes devising a cohesive strategy to deal with illegal brokerage and forex activities and errant companies and to take effective measures in this regard.

This was stated by the SECP Chairman Dr Tariq Hasan at a joint press conference with the SBP governor Dr Ishrat Husain here at the press club on Wednesday.

The statement read out by the SECP chairman said the two regulators had devised a coordinated strategy to deal with the menace of illegal brokerage and forex activities including illegal deposit taking from the general public at fixed returns, future currency trading, commodity futures trading, index trading, etc.

Further, the task force is also coordinating with other government agencies such as the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA). It will ensure that the scope of its investigations/actions extend to all such illegal activities carried out by both individuals and corporate bodies whether in major cities or small towns, says the statement.

It said the central bank and the SECP had “comprehensive functional and institutional powers to take action against these companies and would ensure that irrespective of the legal forms of these businesses there was no jurisdiction gap and nobody could escape the ambit of law.”

The statement said the SBP and the SECP had further intensified their vigilance and monitoring activities to identify other individuals/businesses who might be involved in illegal business activities. “We would be grateful to the public for cooperation in this regard and providing information about such illegal and unauthorized activities,” the two regulators said in answer to a question.

They said both the central bank and the commission had repeatedly cautioned the people through notices in leading newspapers not to deal with such illegal and unauthorized businesses and to ensure that the institutions they chose to work with were duly registered and licensed by the SECP or the SBP.

The SECP has already filed winding up petitions against 14 companies with the Lahore High Court and the Sindh High Court and issued prohibitory orders against 22 companies under section 472 of the Companies Ordinance, 1984 read with section 88 of the said ordinance, prohibiting them from inviting and accepting deposits from public forthwith and to return the depositors money already collected by them.

The LHC has already ruled against nine companies and ordered to freeze the accounts of their directors. The court, however, ordered to de-freeze the accounts for returning the money of depositors through cross checks.

Furthermore, the SECP has issued an administrative order restricting the transfer of membership of certain members of the Lahore Stock Exchange who are allegedly involved in illegal and unauthorized activities without prior approval of the commission. Furthermore, a prohibitory order has been issued to Apex Service (Pvt) Ltd under section 20 of the Securities and Exchange Ordinance, 1969 for dealing in securities illegally and without due authorization in violation of section 5A and 8(4) of the Ordinance.

Dr Hasan said the SECP had also decided to take action under section 264 of the companies Ordinance, 1984 against those companies that had failed to furnish requisite information pertaining to their activities to the registrar of companies.

The central bank has issued 76 notices to 55 entities and individuals under the provision of section 43A of Banking Companies Ordinance, 1962 in terms of which necessary information has been called for, the statement said. Out of 67 addresses of entities/individuals, it said, 10 entities belonged to one single individual and thus the actual number was 57. The central bank had already started action against two companies.

“Therefore, notices were actually issued to 44 entities and 11 individuals. Some 34 notices have been received back undelivered. The bank has deputed officers from its various locations to visit and confirm whether the addressees have not received the notices intentionally or otherwise.

It has been confirmed by these visits that offices of these companies were not found at the given addresses at the time of issuance/ delivery/inspection of these places. However, 20 notices issued by the bank have been responded and cases of suspected individuals/entities are being examined for initiating appropriate legal action and subsequent prosecution before the court,” the SECP chairman stated.

Dr Husain said the regulators were following the due course of law against the illegal activities of such entities/individuals. He said the cases against such companies/individuals would be filed with the courts whose verdicts would be executed by the regulators.

He appreciated the role of the LHC in deciding the cases against nine such entities and providing relief to their depositors.

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