ISLAMABAD (December 15 2006): The Securities and Exchange Commission of Pakistan (SECP) will complete investigation based on forensic report against five top brokerage houses/financial institution in the next fortnight, whereas complete details in all 88 cases would be made available within next two months.

SECP Chairman Raziur Rehman on Thursday told the National Assembly Standing Committee on Finance that all 88 brokerage houses/financial institutions have responded to the show cause notices issued to them.

The SECP has again written to these brokers, who provided incomplete information, and asked them to re-format data and submit the missing information not later than December 14, 2006.

In the first phase, the SECP will provide details as directed by the NA Standing Committee on Finance about the five top brokers including Arif Habib Limited, Aqeel Karim Dhedhy Securities (Pvt) Ltd, BMA Capital Management, Taurus Securities Limited and Jehangir Siddiqui Cap. Markets within 15 days.

Complete details would be provided about 88 brokers including 13 leading brokers would be catered to the committee in two months time, Razi told the committee. He assured that the commission would immediately take action against the violators on completion of the investigation and details in this regard would be given as per timeframe to the committee.

By February 28, 2007, the SECP will be in a position to judge whether 88 brokers have flouted the law or not. It has issued instructions to all the stock exchanges that the "order books" be maintained for at least one-year period.

The commission has called for retention of one-year data, which should not be deleted. In the past, the KSE has not maintained the data pertaining to the "order books".

He assured that Diligence firm would be recalled to analyse data if necessary.

He said the SECP is removing weaknesses in the existing system systematically so that sudden measures should not have negative impact on the stock exchanges.

Responding to the questions on credibility of forensic expert, he said that the terms of reference for hiring the M/s Diligence was not a secret and their scope of investigation was clear under the TORs.

The commission has appointed the firm after completion of all necessary paperwork. Due process was adopted prior to selection of the company. At the time of approval of the firm, there was no TORs, but later the SECP took its initiative for preparation of the TORs.

About the appointment of M/s Diligence, former SECP Chairman Dr Tariq Hasan told the committee that the SECP first choice was to get a forensic investigator from Pakistan. The SECP had contacted top four local accounting firms to conduct forensic investigation but none of these companies was ready to take the task as they had already worked as auditors for leading brokers, he recalled. The SECP contacted one Hadayat Ullah, who was local forensic expert but also refused to take the assignment. Later, SECP moved to four international best accounting firms including a Canadian company for carrying out forensic investigation in the March-crises. These firms were also not ready to take the assignment.

One of the firms has liaison/partnership with the local accounting firm. Thus, all top eight national and international forensic experts refused to conduct investigation.

The former SECP chairman said the commission had also contacted two US accounting firms in Boston and New York but they also had conflict of interest.

M/s Diligence was appointed on the recommendation of an ex-executive director of SECP Arif Mian, who had closely worked with the firm in Canada. Particularly, the firm was appointed keeping in view the expertise of Tsui, an ex-employee of US Securities Market. Tsui had conducted a lot of forensic investigation. When Kashmala Tariq, MNA asked whether Tsui was part of the forensic investigating team, both the existing and former SECP chairmen were unable to answer.

The chairman SECP said that it is not clear whether Tsui was part of the team or not. About the payment made to the M/s Diligence, Commissioner SECP Rashid I Malik told the committee that $650,000 was paid to the firm till October 2006 and after making remaining payment, the total amount stood at $800,000.

Syed Haider Abbas Rizvi of MQM said that instead of challenging the credibility of the firm, the SECP should be allowed to continue the investigation.

"We are getting results and there is no need to go into the controversy of Tsui involvement in forensic investigation team," he said.

Copyright Business Recorder, 2006