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SECP will have its own Financial Crimes Wing

ISLAMABAD (September 13 2003): The Securities Exchange Commission (SEC) will have its own Financial Crimes Wing as a pro-active body to prevent or pre-empt any cognisable offence in the capital markets or companies and non-financial institutions.

In his first interaction with selected journalists of Islamabad on Friday, new SEC Chairman Dr Tariq Hassan disclosed on Friday that he was working on a new concept of a Financial Crimes Wing for SEC.

The commission is no doubt a regulatory body for the capital market but under the Companies Ordinance has to look into financial dealings of companies and non-financial institutions.

In the past, massive financial scandals like that of finance companies in the 80s or co-operative scam in early 90s and now mobilisation of huge deposits by unregistered bodies had been taking place and SEC took action after the wrong had been done.

According to him, a team of young experts of the proposed wing should be proactive, monitoring the market and gathering financial intelligence.

Being well-versed in their job, they should sense any financial misdemeanor and move against it well in time.

Dr Tariq Hassan, who took over last month, gave out his concept of having a financial crimes wing, while discussing the recent scandal of the brokers and forex dealers luring a large number of gullible persons to make deposits on promise of huge profits.

He said that apart from its regulatory duty of companies, the ordinance mandated it to take action against unregistered companies and non-bankin gbodies for seeking any kind of deposits.

“Therefore this innovation of SEC's new responsibility came to his mind, and the setting up of financial crimes wing was a concept whose concrete shape and feasibility would be worked out.”

Replying to a question, he said it should be in place by year's end.

According to him, the wing would operate a rapid response force to investigate and probe any financial crime. Its need has been strongly felt because of such scandals, he said, adding that already a vigilance cell in SEC was receiving complaints against the brokers and moving in the market and gathering intelligence.

Earlier, he told newsmen that SEC and State Bank of Pakistan are moving ahead successfully against the institutions involved in the recent scandal. He was not sure of the total loss by the depositors who, he said, were shy to declare their true amount.

It may be stated that SEC announced in July that the commission had unearthed 39 brokerage houses that were illegally raising huge funds from the public. Their assets have been frozen and cases are moved to courts.

In all 60 companies were involved. Of these, SEC is taking action against 36 non-financial institutions while the State Bank is pursuing cases against 24 forex companies. Both are co-operating with each other, he added.

Insurance companies: Answering questions about the insurance companies operating under Islamic framework, he said the basic objective is to protect the policy holders and the shareholders.

“Since under Islamic injunctions, no fixed profit is to be paid, the policyholders face greater risk. Therefore, insurance companies' operations are well regulated and strictly monitored.” He disclosed that SEC is now engaged in framing rules and regulations for the insurance sector.

He further stated that since concept of insurance under Islamic mode was altogether new, different models were being discussed. “Some favoured the Malaysian model, while others want our own model in conformity with our own conditions.”

Dr Tariq Hassan said that insurance offered a huge market as was stressed by the Finance Minister and State Bank Governor.

The insurance industry has not cashed in the vast opportunities nor any financial innovations were made, he added.

Regarding phasing out of badla transactions, the SEC chairman said that the earlier deadline of June 30 could not be adhered to. “Margin financing which would replace it is being discussed with the State Bank of Pakistan. They are looking at various modalities of phasing out the badla system.”

IMPROVEMENTS: SEC also gave a written handout about improvements in SEC's working in recent years.

Some of these included in the handout, are:

— Amendments in Companies (Invitation and Acceptance of Deposits) Rules, 1987, have been proposed to safeguard the interest of general public and to bring the deposits taken by the companies, involved in the business of development of housing estates, colony organisation and in automobile sector within the ambit of the Rules.

— The Companies (Registration Offices) Regulation, 1986 have been replaced with the new Companies (Registration Offices) Regulation, 2003.

Under the new regulations the Registrar of Companies will henceforth be required to dispose of the cases of the company with definite period of time.

— Computerised workflow operational at the Commission's head office and Company Registration Offices having an interface with electronic Document Management System, has improved efficiency and effectiveness to facilitate registration and ensure compliance.

The SEC is also gearing towards allowing on-line filing and registration subject to the measures taken by the Federal Government under the Electronic Transaction Ordinance, 2002.

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