ISLAMABAD: National Assembly Standing Committee on Finance, Thursday, directed the Securities and Exchange Commission of Pakistan (SECP) to take action against the fraudulent Modaraba companies involved in financial frauds and blackmailing to avoid scams such as “Double Shah” in future.

Sub-committee of the National Assembly Standing Committee on Finance and Revenue met at the SECP head office under the chairmanship of Chaudhary M Barjees Tahir on Thursday.

Barjees Tahir directed the SECP that the Modaraba Companies and Modarabas (Floatation and Control) (Amendments) Bill, 2020 must be amended in such a way so that the frauds like “Double Shah” and Gujranwala and KP scams must not happen again. After a long period of 42 years, the government is amending the Modaraba law. No one should be allowed to blackmail investors as well as poor people in the name of Islam, he added.

During the meeting, the committee recommended the SECP to provide protection to the investors in the Modaraba companies. Bills of rupees of the general public are still stuck up in the Modaraba scams. In the past scams like Double Shah and similar frauds have taken place which must be averted through effective legislation, committee members observed.

The SECP team made a presentation on the salient features of Modaraba Companies and Modarabas (Floatation and Control) (Amendments) Bill, 2020.

Sub Committee, which includes MNAs Salahuddin Ayubi, Engr Sabir Hussain Kaim Khani, and Wajiha Qamar, made comments during a comprehensive review of the draft bill. Subcommittee agreed to endorse its reviewed draft to NA Standing Committee on Finance and Revenue.

The proposed Modaraba Companies and Modaraba (Floatation and Control) Ordinance, (Amendment) Bill, 2020 seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as a pure Islamic financial institution of the country.

The proposed Modaraba Companies and Modaraba (Floatation and Control) Ordinance, (Amendment) Bill, 2020 seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as a pure Islamic financial institution of the country.

During the committee, the SECP officials further informed that the proposed Ordinance intends to amend more than 40 years old Ordinance and regulate the business of Modarabas and Modaraba Companies to provide protection to the investors, modaraba certificate holders and the public.

The bill provides incentives to entrepreneur and prospective investors to invest and carry out their businesses under the umbrella of regulated structure of Modaraba to earn halal profits on their investments.

The existing Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 was promulgated by the Federal Government in 1980 since inception, no substantial changes have so far been introduced except the inclusion of some administrative powers for the Commission and the Registrar Modaraba.

The bill focuses on the growth of the modaraba sector through the introduction of various reforms such as the concept of establishment of unlisted modaraba, empowerment of the certificate holders through the introduction of the concept of annual general meetings to ensure maximum participation of certificate holders in decision-making process of a modarba and providing an enabling environment for ease of doing business.

It will facilitate the growth of the economy in general and the Islamic financial sector in particular by providing simplified procedures for ease of starting and doing business, greater protection of investors and augment corporatisation in the country.

The proposed bill seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as a pure Islamic financial institution of the country.

In order to give immediate impetus to the Islamic financial industry and to stimulate economic growth, there is an emergent need to promulgate the proposed Modaraba Bill, 2020 to provide incentives to entrepreneur- and prospective investors to invest and carry out their businesses under the umbrella of regulated structure of modarba to earn halal profits on their investments, the SECP officials added.

Copyright Business Recorder, 2023

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