According to one of these orders issued by the SECP, the order has disposed of the proceedings initiated under 159(5) of the Securities Act, 2015 (Securities Act) by the Securities and Exchange Commission of Pakistan ("Commission") through Show Cause Notice No 1(39)SMD/LCID/2015 dated September 16, 2015 ("Notice") issued to the involved individual ("Respondent").
The facts of the matter leading up to aforesaid notice are that a company pursuant to prospectus approved by the Commission offered 18,750,000 ordinary shares through book building process to institutional investors and High Net Worth Individuals at the floor price of Rs 43 per share. The prospectus was published in media for the information of all concerned/general public. The term High Net Worth Individual was defined in the prospectus as "individual investor who applies or bids for shares of the values of PKR 1,000,000 or above in the book building process".
The commission at the time of approval of the prospectus inter alia imposed a condition, which was published in the prospectus that "the eligible investors shall not place consolidated bids. A bid application which is fully or partially beneficially owned by persons other than the one named therein is considered as a consolidated bid. The book building process was held on June 10 and 11 2015 and strike price of Rs 95.00 per share (as per Dutch Auction Method) was determined. 702 bidders participated in the book building process, out of which 384 bidders were notified as successful by the book runners. The respondent also participated in the book building process and was allocated 6,000 shares of the said company.
The commission carried out an investigation into the book building process of the said unit. The investigation team recorded statements of some of the bidders, including the Respondent (individual). During the process of recording of statement by the investigation team, it was admitted by the Respondent that the money was contributed by him and his friend. Thus, it appeared that the Respondent has placed a consolidated bid on behalf of himself and his friend, in violation of Section 87 of the Securities Act, which attracts penal provisions of Section 159(5) of the Securities Act.