I have the following questions which I presume should be answered by the respected Board of Karachi Stock Exchange and the Government of Pakistan. 1. I believe the Government of Pakistan is forming a "Special Fund" which would enter the market and will buy shares of the government owned entities.
This fund is likely to be financed by National Bank of Pakistan (NBP), National Investment Trust (NIT), Employees Old Age Benefits Institution (EOBI), State Life Insurance Corporation (SLIC) and others. My question is that these entities are engaged in a very serious business and are custodians of pensioners, widows and individual investors' deposits. How can government enter into such deal just to protect the interest of a handful of corrupt members of the KSE?
2. These members have made billions over the past several years and have always been able to get income tax exemptions for capital gains, thus have never shared their gains with the government. Now these members are asking for a fund amounting to Rs 50 billion. My question is on what ground?
3. The Board members of KSE are involved in this mega corruption whereby putting on the floor on the pricing and as such the results of all banks, financial institutions, large corporations are misleading. I want to put the blame on the Board of KSE for these misleading results of all organisations. I encourage the individual shareholders of all these companies to file a suit for recovery of the damage caused due to these incorrect and inflated results.
4. It is also being reported that NIT will issue PUT OPTION only for the foreign shareholders for a price at a certain future date. I also encourage the unit holders of NIT to stop NIT for issuance of these options as this option will considerably reduce the NAV of their units.
5. Many a time we have read and heard that the government should not interfere in the affairs of the business and should only make a long term policy and should act like a facilitator. The Board of KSE has now started to manipulate the aim of the government and is asking them to fill the gap in order to save the gamblers with hard earned money of the pensioners and other stakeholders.
6. The crisis would not end here and the Board of KSE will ask the government again and again to fill the gap as there is no confidence in the market either from the individual or the foreign investors.
The members of KSE Board want all the banks to be bankrupt as the margin call from the members will not be complied with. I want to ask the Board of KSE that as per the definition of a Guarantee Limited Company, all the members of the company are equally and severally liable for losses. Hence, if default is made by one broker it has to be covered by another and so forth. Therefore, the largest will take a bigger bullet.
7. We also learn that a few of your brokers have pledged the shares which were held by them in their sub-account and around 600 of such claims have been received to-date. Can any Board member of KSE has the courage to answer how they are going to resolve this issue and what are the obligations of KSE towards these claims?
8. The members of KSE have also forced SECP to issue an order whereby the unit holders of stock/balance funds cannot get their units encashed. My question what if the floor is not lifted for the next one year? I urge the unit holders to file a Constitutional Petition to get relief as according to the law no one has the right to deny the encashment.
By writing this letter I urge clients to force the government not to bail out the members of KSE as they are taking advantage of the situation and let them suffer for their doings. Just a word of caution. If the government bails out the stock brokers then the government should be ready to bail out the banks, financial institutions and other institutions as well.
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