SECP chief in the line of fire!

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Securities & Exchange Commission of Pakistan (SECP) Chairman Muhammad Ali was a partner in a construction business with brokers he regulated till mid-2011, serving as chief of one of the top regulators of the country, a national newspaper reported on Thursday.

Ali, appointed SECP chairman on December 24, 2010, was a 15 percent shareholder in RI Enterprises, which had four other partners — all stock market brokers, according to Federal Board of Revenue (FBR) documents for the financial year ending on June 2011.

The partnership between stock market brokers and a regulator raises eyebrows because this arrangement remains open to nepotism and abuse of authority. One of the partners, Dawood Jan Mohammad, a leading name at the Karachi Stock Exchange, has a number of cases pending against him relating to massive tax evasion which conveniently go nowhere near prosecution with the current SECP administration, market sources said.

The FBR documents stated that Ali had opening capital of more than Rs 52 million in RI Enterprises. A pre-tax profit of around Rs 5.5 million was earmarked in his name in fiscal year 2010-11, taking his total drawing capital right to a little over Rs 56 million. The FBR accused the company of evading Rs 2.5 million worth of taxes in the fiscal year 2010-11.

The SECP chairman denied he was a partner in RI Enterprises after assuming office and said he had sold his shares in early 2006. He claimed he had all documents to prove he had sold his share in the business in 2006. He further said the confusion on the FBR documents is because his former partners did not remove his name from the business.

In Pakistan it remains a common practice that the relevant authorities — the registrar office in this case — are often not informed about the change in partners in time, he added. However, analysts found it surprising that an expert of Ali’s caliber failed to properly close his deal after selling his stakes in a business. An expert went on to say that Ali would have been well aware that his financial issues would remain secure if he remained a partner and that was why he did not get his name removed. “He would have thought that if this was pointed out he could say his partners had not removed his name,” he added.

They were of the opinion that a person of Ali’s stature, who has been in the stock market business for a long time, and has been at key positions leading big brokerage houses such as Elixir Securities and WI Carr Securities cannot be expected to make such a mistake.

Mansoor Ahmad Janjua, an official of an Islamabad-based brokerage house, who lodged complaints against the SECP chairman at the Federal Tax Ombudsman, Inland Revenue Karachi and FBR, questioned why Ali did not take action against his former partners for not removing his name from the documents of the business.

Janjua further said that in his declaration to tax authorities for FY 2010-11 and FY 2011-12, Muhammad Ali cited seven and six businesses respectively in which he had stakes, but there was no mention of RI Enterprise in them.

SECP Securities Market Division Commissioner Imtiaz Haider said Januja worked as the company secretary of a brokerage house, Ahmed Nadeem Securities, which remains under scrutiny for defaulting on payments to its investors.

The brokerage house, he added, had applied for voluntary winding up of operations after defaulting on payments for Rs 80 to Rs 90 million. He questioned the motives behind what he called was a propaganda against the SECP chairman. The Islamabad Stock Exchange, he further said, had frozen the membership of its owner and investigations were underway.

The SECP chairman said an organised campaign had been lodged by some powerful brokers to malign him because decisive action was being taken against them for violating various rules and regulations and manipulating the market. However, his appointment has also been challenged in the Supreme Court, a judgment on which has been reserved.

It is speculated that powerful stakeholders in the Karachi business community, that are close to Pakistan People’s Party (PPP), are lobbying for Ali be to the country’s finance minister.

4 COMMENTS

  1. Yes, this is definitely a NAB matter. Corrupt regulators have wreaked havoc in Pakistan…OGRA being a prime example. Time for the government to take a serious look at how it appoints people to such organisations at senior levels.

  2. The chairman was a very honest and hard working individual. He has been made to resign due to dirty politics within our country . Try not to blame anyone without knowing the actual facts . The above documents is a biased one and reports what the opposition against Muhammad Ali wants the media to publish .

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