SECP sets up financial crimes wing

ISLAMABAD, Dec 30: A Financial Crimes Wing has been created in the Securities and Exchange Commission of Pakistan that will help prevent white-collar crimes by keeping a close watch on all the major sectors of the capital market in Pakistan.

The cases thus unearthed, SECP chairman Dr Tariq Hassan stated at the end-of-the-year press conference here on Tuesday, would be referred to the National Accountability Bureau for prosecution and trial. This was because the SECP is not a prosecution agency and its role is only to regulate the capital market in its numerous sub-sectors.

In this connection, a Monitoring and Surveillance Unit would be established in each division of the commission. In reply to a question, Dr Hassan said the commission in conjunction with the State Bank of Pakistan had succeeded in forcing all the 36 illegal foreign exchange companies and brokerage houses as well as the partnerships established by directors of these entities to elude action against them.

Some of them had, however, fled overseas to preempt punitive proceedings against them, he observed. Before the press conference, the SECP chief had presided over the first meeting of the re-constituted Securities and Exchange Policy Board (SEPB) after a prolonged dormancy.

The board, comprising nine members from public and private sectors, would meet once in three months and provide as a bridge between the regulatory body and the government as well as between SECP and the private sector.

The fact that it includes a functionary of the Rural Support Programme of Balochistan, an NGO, indicated that corporate social responsibility would be among the elements of policymaking.

In order to ensure that the SEPB is a policy-based entity, a Policy Division had also been set up within the SECP to devise policies for the development of each sub-sector of the capital market such as securities, insurance, non-bank financial companies etc.

The next meeting of the Policy Board would be held towards the end of January by which time it was expected that the SECP would be able to present a policy statement.

Responding to a question about the legal aspects, Dr Hasan said he was also endeavouring to strengthen rule making. But even more important than rule-making was the effective implementation of existing rules which, in turn, depended on the capacity of the executing agency.

He was also asked about the measures that the SECP might have taken in order to infuse social responsibility in the corporate sector. The commission, he stated, would facilitate the companies performing in line with their obligations towards the society. But it had to be voluntary.

In this context, he went on to mention the Corporate Development Index which he was trying to develop in the SECP. This index, the parameters of which had yet to be given a definite shape, would serve as an incentive for the companies in a socially responsible manner.

Thus while it would be more than a credit rating which is concerned only with the financial aspect of a company, although compliance with the rules, behaviour related to payment of dividend and natural environment etc., too would figure in the index. As to whether a company's record pertaining to labour standards too would be one of the variables, he did not say.

The ranking of companies in the index would, accordingly, serve as an incentive for the companies to perform in a manner conducive to development of the capital market, he added.

He did not agree with the suggestion that the current level of the KSE 100-share index was artificial. All the analysts agreed that it was well within the potential of the capital market, Dr Hassan remarked.

Nonetheless, it was a good sign that the public was coming forth and taking active part in the stock trading, particularly after the induction of OGDCL and National Bank of Pakistan into the shares market.

A journalist drew his attention to the fact that the high premium charged on new issues amounted to pre-emption by the sponsors of whatever profit might accrue to the small investors.

The price at which OGDCL and NBP shares, for example, were sold to the general public meant that substitution of savings schemes with equity stocks was not the intention of the policy makers, he pointed out.

The SECP chairman said the stock market was not for those with faint hearts. He was, however, of the view that there was the need to present to the public more financial instruments with zero risk such as TFCs etc., and low risk such as mutual funds.

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