The Securities & Exchange Commission of Pakistan (SECP) has endeavored to continue its efforts for the development of a transparent and efficient stock market by ensuring investors’ protection and strengthening the enforcement procedures.
Adopting an aggressive approach for the prevalence of a fair market, the Securities Market Division (SMD) has been practicing vigilant supervision and stringent oversight of the securities market.
In this regard, during the month of April 2013, the SMD have issued 10 Orders, 34 Show Cause Notices, and 12 Warning Letters to various companies, and individuals for contravening the various provisions of the Securities and Corporate Laws Order was passed against the Chief Executive Officer of CYAN Ltd, who was also a director in Dawood Hercules Corporation Ltd, an associated listed concern, for indulging in a scheme of insider trading, and a penalty of Rs. 1 million was imposed.
Further, in the same context, an order was passed against CYAN Ltd for insider trading in the scrip of Dawood Hercules, and a penalty of Rs. 2 million was imposed; moreover, an order was issued against CYAN Ltd for trading in the shares of its associated concern in the closed period.
During the month of April 2013, five Show Cause Notices have been served for insider trading to various entities and individuals; moreover, three Show Cause Notices have been issued to listed companies for violation of the Listing Regulations; a further six Show Cause Notices were issued to KSE, Brokers and their Auditors for violation of the Securities and Exchange Ordinance, 1969.
In addition, sixteen Show Cause Notices were issued to Directors and Beneficial Owners of listed companies for late filing of the returns of beneficial ownership, and four Show Cause Notices were issued to Beneficial Owners and Issuers of the listed securities for recovery of the tenderable gain under Section 224 of the Companies Ordinance, 1984.
In a ceremony held at the head office of ABL Asset Management Company Ltd – a Trust Deed was signed between ABL Asset Management Company and MCB Financial Service, whereby Allied Asset Management appointed MCB Financial Services as their trustee for their upcoming ‘ABL Islamic Stock Fund’.
Farid A. Khan, CEO Allied Asset Management and Mr. Khawaja Anwar Hussain, CEO MCB Financial services, signed the agreement.
ABL Asset Management Company Ltd is a wholly owned subsidiary of Allied Bank Limited (ABL) which is currently managing over Rs. 20 billion of retail and institutional funds and is ranked amongst the largest fund management company in Pakistan.
According to the press release issued by the company, ‘ABL Islamic Stock Fund is a shariah complaint, open-end fund which will provide investors an attractive opportunity to tap the enormous potential of Pakistan’s equity markets and earn halal profits’. The fund will be launched by end of May 2013 and will be available at all branches of Allied Bank and Allied Asset Management.
ABL Islamic Stock Fund will be managed by Allied Asset Management under the guidance of Mufti Irshad Ahmed. After the successful launch of ABL Islamic Income Fund, this will be the second Islamic fund in ABL AMC’s portfolio. The firm already manages the highly successful ABL Stock Fund, which delivered an annual return of 45.3% (as at 15th May 2013).
UBL Funds, under its Smart Investment Plans’ umbrella, has launched the UBL Wealth Builder Plan. The Wealth Builder is designed keeping in mind the need of investors for a lump sum and/or regular contribution plan that builds over time and is ideal for those who are not investment savvy but still want to capitalize on attractive returns.
CEO, Mir Mohammad Ali, CFA on the launch of this plan, said: “The UBL Wealth builder suits a wide group of people in various stages of their careers and life. The systematic investments feature assures that over time and with regular contributions, investments will grow to an extent that will greatly assist in achieving their financial objectives in life.”
UBL Wealth Builder Plan not only offers a Shariah-Compliant Islamic version but also boasts attractive features such as a moderately low account opening balance of Rs. 20,000 and easy minimum subsequent payments of just Rs. 2000 with no penalties on irregular payments or application of any withdrawal charges to allow investors maximum liquidity.
UBL Funds is one of Pakistan’s leading asset management companies with presence in the Middle East as well and provides organizations, institutional clients and individual clients with advisory services, comprehensive investment solutions and excellent products.
UBL Funds also enjoys the privilege of receiving the High Management Quality Rating of AM2 by JCR-VIS Credit Rating Company and has recently completed a decade of successful services.
If its too good to be true – then it probably is. Well, who knows it for real? Just weeks ago, two listed companies including a consumer giant, UniLever Pakistan and Wateen Telecom, departed from Karachi Stock Exchange, hoisting concerns from investors’ community.
Why are they leaving the exchange? Is it the worsening security conditions? Stringent listing regulations? or something else? Market was brimming with rumors with every side to share their own story assisted by supporting theories.
Recent announcement made by Securities and Exchange Commission of Pakistan (SECP), apex corporate regulator, might relax these rumors. While addressing the ‘Pakistan IPO Summit-2013′, Imtiaz Haider, Commissioner Securities Market Division, said that SECP has been reviewing the listing regulations of the stock exchanges to make the listing process more efficient and less cumbersome.
Real Question is – How much Less Clumsy?
Imtiaz admitted that despite consistent efforts and technological development the number of new listings in Pakistan is not encouraging – as during the last three years only 13 IPOs have been witnessed in stock exchange. (Just so you know, almost 78 companies left the stock exchange).
To this end, he said, all the key players associated with the IPO market need to collectively enhance their efforts to address the situation and encourage the companies to tap the capital market for meeting their financial needs through IPOs. He was of the view that the purpose of the summit will be best served if it
would successfully highlight the benefits of listing in stock exchanges.
Imtiaz informed the audience at Summit that the SECP has introduced a number of changes in its regulatory framework to make the process of listing more accessible and efficient including the introduction of book building process, publication of the Listing Guide Book, the launch of e-IPO and establishment of separate IPO Portal on the official website of the SECP with all the relevant data, information, laws, guidelines and checklists.
Another Good News (Hint: its tax related)
Imtiaz Haider revealed that on the recommendation of the SECP, the government has announced a five-years tax holiday for all those new projects and balancing , modernization, replacement & expansion projects, where such projects are financed entirely through equity.
The stock market is one of few sources that may facilitate the corporates to avail this incentive, he added.
He also revealed to the audience that SECP has proposed the Ministry of Finance and the Federal Board of Revenue (FBR) to reduce the rate of income tax for the companies that are listed on stock exchanges.
Small & Medium Size Companies Can also Join Stock Market
Personally – I’m a huge fan of this idea but not sure how SECP is going to make this happen. There are more than 61,000 Private Limited companies (number of unregistered companies are way more than this).
During his speech, Imtiaz Haider, also disclosed the plans to attract this growing sector of private companies. He told the audience that the SECP has been considering development of an SME Exchange that will allow small enterprises to generate required capital. The laws for listing of SMEs on the proposed SME exchange will be comparatively simple, he added.
If it all materializes – Pakistan’s equity market will see a new boom and a new stream of business for brokers, auditors and consultants with more investment opportunities for investors to sink their teeth in.
Considering the need for Islamic Financial Institutions (IFIs) and Islamic Capital markets (ICMs) to innovate and operate within the purview of Shariah principles and to ensure that aforesaid organizations’ business dealings are in line with Islamic principles, the Securities and Exchange Commission of Pakistan deemed it necessary to have a central advisory body to guide their transactions in accordance with the principles of Shariah.
Accordingly, the Commission has given its formal assent on the formation of Shariah Advisory Board (the SAB of SECP) pursuant to Section 9 of the Securities and Exchange Commission of Pakistan Act 1997 (XLII of 1997).
The (9) members of, “the SAB of the SECP” shall include prominent Shariah Ulemas, a jurist, an accountant and representatives of the Commission. Each member of the SAB shall be a qualified individual with in-depth knowledge and experience of Islamic accounting, finance, economics and Shariah law.
Apart from acting as a reference body and advisor to the Securities and Exchange Commission of Pakistan (SECP) on Shariah matters, “the SAB of the SECP” shall be entrusted with the ascertainment of Islamic law for the purpose of development and promotion of Islamic Financial Institutions (IFI) which includes Islamic Mutual Funds, Islamic Pension Funds, Takaful Operators and other financial institutions which are based on Shariah principles and are supervised and regulated by the SECP.
Some of the key functions to be performed by SAB of the SECP are to validate the products of IFIs and to ensure their compatibility with the Shariah principles; recommend guidelines on the criteria for investment by Islamic Capital Institutions; advise on reporting & auditing standards; undertake educational activities for understanding of Shariah principles; and the introduction and implementation of new models and products based on international research.
It is envisaged that the SAB shall play a crucial role in bringing an effective and efficient Shariah Governance System, thereby enhancing the credibility of IFIs and ICMs which will ultimately contribute to the achievement of the SECP’s fundamental objective i.e. protection of the investors/policyholders’ interests.
The SAB of SECP shall also endeavor to foster the growth and development of Islamic Financial Market and provide guidelines for devising new products and services.
The SECP registered 383 new limited liability companies in March, bringing the total corporate portfolio to 61,887 companies.
Despite Gloomy Economic Conditions – Pakistan is still proving itself an Attractive Place to Invest in
Compared with preceding month, 8 per cent growth in corporate registration has been witnessed. The growth witnessed is a result of persistent efforts put forth by the SECP in order to promote corporatization in the country, including holding of various seminars with all stakeholders, awareness campaigns and facilitation extended.
Chasing the previous trend, around 93% companies registered as private limited companies, while around 6% companies registered as single-member companies during the month.
Due to the SECP’s facilitatation regime for foreign investors including, fast-track provisional registration of companies having foreign directorship, considerable foreign investment has been witnessed by nationals from Germany, Panama, China, the UK, the Netherlands, North Korea, Russia, Syria, Turkey, Italy and Japan, in 12 new local companies. These companies are from communications, engineering, mining and quarrying, trading, construction, services and automobile parts sectors.
The tourism sector has taken the lead in new registrations with the incorporation of 54 new companies, this month, followed by trading with 52 companies, services with 44, I.T. with 28, corporate agricultural farming with 20, broadcasting and telecasting with 17, communications with 16, construction with 13, food and beverages, and transport with 11 companies each.
Historically, most companies get registered in Lahore or Karachi, however, this month 115, were registered at the Company Registration Office (CRO) in Islamabad. It is followed by the CROs in Lahore and Karachi, registering 105 and 101 companies respectively. The Peshawar and Multan CROs registered 23 companies each, while the CRO in Faisalabad and Quetta registered 10 and 5 companies respectively. The Sukkur CRO registered 1 company.
During the month returns for increase in the authorized capital of 101 companies were accepted, with the total authorized capital increment of Rs24.55 billion.
In addition, 98 companies filed returns for an increase in the paid-up capital with the total enhancement amounting to Rs 1,025 Crore.
The Securities and Exchange Commission of Pakistan (SECP) has initiated an inquiry into the affairs of registered companies that were accused for defrauding the general public by offering them investment opportunities in illegal schemes.
The SECP has taken the action on various complaints received against these companies for illegal deposit taking in the name of Modarabas. The articles of association of these corporate entities were not allowed them to deal in the modarba products.
These registered companies are M/s Spadix Group of Companies (Pvt) Ltd, M/s Pak Tea Company (Pvt) Ltd and M/s Spadix Pharmaceuticals (Pvt) Ltd of Spadix Group.
The SECP has recently received a letter from the State Bank of Pakistan (SBP), wherein it was reported that associated companies of M/s Spadix Group were involved in illegal deposit from general public in the name of Modarba.
The SBP mentioned the following names in its letter;
1. Spadix Pharmaceutical Company
2. Goodman Pharmaceutical Company
3. Sanitory Works (Fayyazi Gujranwala Industries (Pvt) Ltd)
4. Cable Works (Fayyazi Gujranwala Industries (Pvt) Ltd)
5. AL-Hassan Autos (Pvt) Ltd
6. Marble Export
In another surprising development – it is learned that Securities and Exchange Commission of Pakistan (SECP) has taken action against Jahangir Siddiqui & Company Limited (JSCL) for awarding over Rs 43 Crore to son of Jahangir Siddiqui, a non-executive director, under the head of advisory fee – an extraordinary payment.
According to reliable sources, the SECP has issued notice to Suleman Lalani, the Chief Executive Officer of JSCL for illegitimate payment to Company’s Chairman’s son and asked to explain its position within 48 hours.
The CEO of Jahangir Siddiqui company would have to clarify and substantiate the advisory services fee of Ali Jahangir Siddiqui in his reply.
According to Jahangir Siddiqui’s 2012 financial statement, the total advisory fee was Rs 44.2 Crore out of which Ali Jahangir Siddiqui received Rs 43 Crore alone.
Interestinlgy – the company has not announced any dividends for the shareholders in the same year. Jahangir Siddiqui & Co. Ltd. was incorporated (under Companies Ordinance 1984) in 1991 as public unquoted company.
What Exactly was the Payment for?
It was mentioned in annual report that the fee charges was rendered in the respective advisory service for signing the Share Purchase Agreement with ICTSI Mauritius Limited under which the Company had sold about 13 million of its voting shares in Pakistan International Container Limited (PICL) at a rate of Rs 150 per share.
The share was sold in March 2012. The agreement was duly approved by the Board of Directors.
Our team at EconomyAge is on this issue. Keep watching this space for more developments.
According to notice sent minutes ago to Karachi Stock exchange – it is learned that Wateen, part of Abu Dhabi Group, is planning to de-list from stock exchanges – another exit of a multinational firm after Unilever Pakistan.
According to the document available to EconomyAge, ‘Warid Telecom International’, the majority shareholder of Wateen Telecom, which presently holds 54% of the total issued shares, has conveyed its intention to acquire all of the issued shares held by other shareholders at a proposed price of Rs 4.5 per share. Company’ share price, which was hovering around Rs 4 in morning, already witnessed a volume of 15 million shares in first 90 minutes of trading.
Warid Telecom seek the de-listing for its shares from Karachi, Lahore and Islamabad stock exchange.
According to the letter sent to Wateen Telecom by Warid, the board believes that there is no longer any equity value in the business from existing shareholders in Wateen – and that without a significant restructuring, which can only be executed if the business is taken private, Wateen will face uncertain financial future which is likely to result in crystallization of a substantial shortfalls for creditors.
Warid made these assessments on the following considerations:
- There is a significant third party debt on balance sheet
- If Wateen continues – there will be possibility that will lead to material loss in value of Wateen
- Plus according to estimates made – the management of Warid Telecom Believes that even on most optimistic basis – cash realized would not recover the existing level of loans (usually these conditions result in Bankruptcies)
Warid Telecom, in its letter sent to the board of directors of Wateen, said that they believes that the de-listing provides the shareholders an exit from the business at a return of value which is in excess of that which they would receive on an orderly disposal of the business, and is therefore a generous offer as compared to other alternatives.
According to the notice – Arif Habib Limited was appointed by Warid Telecom as the purchase agent, who will oversee and manage the buy-back process.
Unilever Pakistan, one of the most successful consumer goods manufacturer in Pakistan, is now facing another issue before a completing its exit from stock exchanges.
The global food giant Unilever owns a majority 75% stake in Unilever Pakistan and 4 months ago in November – they announced and planned to buy back the remaining shares that are listed on stock exchanges in Pakistan, a move that is aligned with Unilever’s global strategy of consolidating its operations in Asia and Africa. According to sources close to the matter, this delisting process will help the Company in lowering its cost of capital.
It will be interesting to note that the delisting does not bar existing shareholders from holding on to their share in the Company’s equity. The buyback offer is only an option – a road which minority shareholders may or may not take.
Although this delisting process of Unilever Pakistan also received mixed response from influential minority stakeholders who balked on the proposed buy-back price of Rs 9,700 per share.
The New York based hedge fund Acacia Partners, which holds 543,000 shares representing a stake of 4.1% in Unilever Pakistan, wrote the following strong-worded letter to all stock exchanges in Pakistan.
“We believe the proposed de-listing of the company (Unilever Pakistan) would, if approved, be a great tragedy for minority investors, the stock exchanges of Pakistan and the country overall”
Acacia Funds also urged that the exchange refuse the buy-back price offered by Unilever. The minority shareholder demands two to three times the price offered by Unilever.
Win for Minority Shareholders in First Round
As much as the the news of delisting was a surprise for investors – the proposed buy-back price of Rs 9,700 per share was not too much comfortable for them. Its interesting to add here that Unilever stock is one of the most expensive on the country’s stock exchanges, currently hovering around Rs. 10,000 per share.
According to the sources close to the matter – many minority shareholders lobbied in SECP circles to protect their interest. And On the request of SECP, the Karachi Stock Exchange had incorporated a Committee to evaluate the proposed delisting of Unilever Pakistan in light of resentment of minority shareholders.
According to a notice of KSE – the committee had detailed discussion with the representatives of sponsors (Unilever) and after deliberating the relevant aspects under listing regulations, recommended to fix the minimum purchase price at Rs. 15,000 per share as against to the initially offer of Rs. 9,700 – a proposed increase of almost 50%.
Unilever Pakistan has now 7 more days to either accept of refuse this purchase price.
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