Campaign against SECP can dent investors’ confidence
There has been recent outburst in the newspapers in the matter of trading of shares of SNGPL and SSGCL in reference to OGRA Scandal where SECP and its officials including former Chairman have been alleged to be involved. A trail of all the correspondence, reports prepared and investigations revealed that all of the stories were misleading and without any grounds. Over last few months a calculated campaign has been orchestrated to malign the senior management and belittle the role of SECP as corporate and securities market watch dog. The falseand baseless reports were published without verification and taking the version of SECP or senior officials who were being defamed. Such reports and news items and disparaging remarks against senior SECP officers have adverse impact on market and can seriously dent the investor confidence.
Surprisingly the role of SECP and its senior officials in the matter of SNGPL and SSGCL have deliberately portrayed in negative light in the press and have been subjected to an unnecessarymedia trial. The fact of the matter is that the SECP had been monitoring the trading in shares of SNGPL and SSGCL as far back as 2009. The preliminary assessment report in 2009 found nothing unusual in the trading pattern. In the subsequent assessment reports of 2010 and 2011 there were no concrete findings and were inconclusive. Having said that the relevant officerrequested for further probe in the matter, which after thorough review was not ceded to on account of insufficient cause/reason for further probe.
However, in view of press reports alleging illegal changes in UFG by OGRA resulting in loss of 42 billion to national exchequer and billions of profits to some brokers and in light of the pending probe in matter of OGRA by National Accountability Bureau, the SECP in exercise of powers under the Securities and Exchange Commission of Pakistan Act 1997 and the Securitiesand Exchange Ordinance 1969 vide order dated January 18, 2013 initiated an investigation into trading of shares of SNGPL and SSGCL during the period from July 1, 2010 till December 31, 201. Upon completion of the investigation a detailed report was submitted by the investigation officers on May 29, 2013.
As per investigation report, in the case of SSGCL, during the year 2010 and 2011 a total of 228.945 million shares were traded at KSE for a total value of Rs. 5,354.607 million. The scrip touched its highest level of Rs. 30.70 on September 30, 2010 and lowest level of Rs. 13.04 on January 18, 2010. In case of SNGPL, during the said period a total of 155.936 million shares were traded at KSE for a total value of Rs. 4,443.403 million. The scrip price touched its highest level of Rs. 36.60 on March 29, 2010 and lowest level of Rs. 15.25 on December 16, 2011.
The Enquiry Officers after thoroughly reviewing the transactions and trading data including telephone recordings and after meeting and having recorded statements of many individualsand entities which were accused to be involved, found no instance of market manipulation during the Review Period. No instance of pumping and dumping, creation of artificial market, false or misleading appearance of active trading, artificial inducement or depression of price, or any act which constitutes a criminal offence under section 17 of the Securities and Exchange Ordinance 1969 has been reported by Enquiry Officers.
After analyses of the relevant record including the research reports and information relating to OGRA determined that buying by NBP and NIT-SEF was due to change in the company’s fundamentals which created a demand supply disequilibrium resulting price escalation and drawing interest from sellers. The announcement of cash and bonus dividend by SSGCL and SNGPL were also the factors that attracted investor and escalated the prices. The Enquiry officers have said that the news of UFG calculations was already in public domain as it is proved from the research reports of the various brokerage houses and therefore, there was a general expectancy of appreciation in the price of the shares which drew interest from the buyers.
No adverse findings were reported against National Bank of Pakistan or NIT-SEF. A minor instance of insider trading against a brokerage house while the Enquiry officers have alsorecommended to further looking into four individuals for front running of funds of SSGC. The SECP has also carried out a review of the Investigation report that too has not resulted in any meaningful exercise and no other findings other than the report itself were made. The Review has actually endorsed the findings of the Enquiry Officers who prepared this report. The copy the Report and the Review report has been shared with the NAB and Policy Board members in addition to submission of the same to Sindh High Court in compliance to its order. The copy of the Report, Review Report and other documents are available with this scribe.
The figures given in the press reports are exaggerated and mostly without any basis, as per the SECP report the entire value of shares traded during the period under review i.e. one year amounts to Rs. 9798 million i.e. Rs. 9.7 billion. The value of shares traded during the 90 day period around the UFG rate change is obviously much less than that. Further in presence of such low volumes in the market, there is hardly any chance of manipulation.
Allegations of conflict of interest have been leveled against the present SECP management especially one of the Commissioners in the media, however, interestingly at the time of the occurrence of this scam, the concerned official was not even in the service of SECP. This fact has also been clarified by the SECP to NAB, along with other information while assisting NAB in Tauqeer Saddiq case. The objective behind the whole affair is not known to anyone but rivalry between the two business groups has severally impacted the integrity and credibility of the SECP as an institution and as a regulator.
