LHC orders to freeze four illegal foreign exchange brokers' accounts

ISLAMABAD (August 16 2003) : The Securities and Exchange Commission of Pakistan (SECP) has received an order against 4 out of 25 unauthorised forex and brokerage companies from Lahore High Court (LHC) on Friday to freeze their accounts and place the names of their directors on exit control list.

They were not maintaining any accounts and could flee any moment.

The LHC decision came under public interest to protect their money from any fraud, said Acting Chairman SECP Abdul Rehman Qureshi, while addressing a press briefing.

The Commission also received assurance from LHC for 45 non-companies for same treatment against their illegal business.

The Commission did not have the copy of the decision while briefing the media.

Such set-ups in toto are 70 and are mostly based in Lahore and Karachi.

Total names of the 45 directors of these companies would be placed on the Exit Control List, as soon as an application would move by the SECP in the Court, Qureshi said.

“Under an LHC order, initially four companies' accounts have been frozen and its directors' names are placed on ECL.

Remaining of the companies nearly 21 and all other set-ups would be shut down and would face same consequences”, he said.

These four companies are Bulls & Bears (Pvt.) Ltd, Offshore Global Management (Pvt.) Ltd, World Business Consultants (Pvt) Ltd and United Brokerage Consultants (Pvt) Ltd misusing public money and calling themselves subsidiaries of the Chicago based US brokers.

“They are doing almost fraud playing with public money”, said Qureshi adding, “If they are brokers they must fulfil the requirements of the brokers under local laws.

An advertisement would appear in national newspapers on Saturday for public awareness.”

The action of SECP to move against those companies in court is based on availability of no record of accounts and after repeated notices to them could not come with any information.

The business of investing in international money, commodity or stock markets were out of the jurisdiction of the SECP.

The initial decision of the court is based on protecting the public interest, which have invested huge money in these activities.

There is a bright chance that people would now rush to the offices of these firms, trying to draw their money forcing these firms to run away.

“Stopping them to invest for one more day would save their money”, said Qureshi.

A survey done by Business Recorder showed that almost Rs 10 billion was invested in this business, offering 3-8 percent rate of return on monthly basis, which becomes 36-84 percent annually.

SECP ascertained that figure of 20-70 percent annual profit.

They started business in 1996 and after the action of the government such companies vanished and now reappearing again.

Qureshi said unauthorised activities of certain companies, firms and individuals enabled them to fleece the public by accepting money in foreign exchange on promise of exorbitant monthly profit.

The Commission initiated action against such unscrupulous persons and while looking into their affairs it revealed that they were offering 20 to 70 percent return on the deposits raised from innocent people and without being companies registered under the Companies Ordinance, 1984 were not maintaining any books of accounts and all the deposits collected from their customers were going in their personal accounts.

The Commission after completing necessary legal formalities moved winding up petitions against the following companies in the Lahore High Court, Lahore:

i) Bulls & Bears (Pvt) Ltd;

ii) Offshore Global Management (Pvt) Ltd;

iii) World Business Consultants (Pvt) Ltd;

iv) United Brokerage Consultants (Pvt) Ltd;

However, all such companies would be shut down and anyone who went for sole proprietorship would be taken care off by the State Bank, who deals individuals who raise funds from public for business purposes.

As the Lahore High Court is closed due to summer vacations but due to urgency in the matter, the court allowed petitions to be filed against these companies.

The case of Offshore Global Management (Pvt) Ltd came for hearing on Friday before Justice Nasim Sikendar and the Judge, while admitting liquidation petition presented by the Commission, directed to place the names of directors of the company on ECL and also directed for moving applications for freezing personal accounts of directors.

Remaining five cases are fixed before the Court on Monday, August 18, 2003, says a handout given after the briefing.

The Handout further adds: “Meanwhile, liquidation petitions in respect of following three other companies are ready for filing in the Lahore High Court and two companies in the Sindh High Court:

Lahore High Court:

i) Forex International Services (Pvt) Ltd;

ii) Track Stations Securities (Pvt) Ltd;

iii) Rouf International (Pvt) Ltd;

Sindh High Court:

i) Whitehouse Securities (Pvt) Ltd;

ii) Wall Street Securities (Pvt) Ltd;

Legal formalities for issuing show-cause notices and providing opportunity of hearing against remaining companies are in progress and the Commission will very soon move similar petitions against all such companies which are found in unauthorised activities.

The working methodology of these brokerage firms has turned out to include the following dubious way of working:

— These brokers generally ask people to make payment of US dollar 5,000 and above per client.

— It is promised to the client that the money would be transferred to some broker's account in another country.

To prove this to the client, they make a telephone call to a telephone abroad which convinces the client that he is investing with an international brokerage although the telephone set is actually located in Pakistan and in this manner they play fraud with the public.

— These brokerage in fact do not remit Dollars collected to anybody outside Pakistan and transfer the same to their own or associated persons accounts in Pakistan or abroad through illegal channels rather than normal and authorised banking channels.

— The clients are asked to sign an agreement stipulating that in the event of loss of investment, the local or foreign broker would not be liable to bear any loss.

Clients' money in last in bits in a few months time and he has no remedy due to the agreement signed by the client.

— Generally, these brokers have made their employees to sit in their premises with computer terminals with pseudo-trading arrangement.

Brokers show these people as agents of the international brokers but in fact they are agents of the local companies.

— These brokers at times promise profit of even six percent per month.

Obviously, this rate of profit is only a fallacy and no business can be expected to earn legally that high profit.

Actually these brokers are making payment of profit out of further deposits obtained from the public.

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