The Securities and Exchange Commission of Pakistan (SECP) has successfully resolved a large number of 1,391 investors and shareholders' complaints and grievances against the companies during 2007-2008. The commission has taken enforcement measures to facilitate investors and resolve shareholders' issues within the regulatory framework of companies laws.
It was learnt here Wednesday that the commission had resolved 1,391 out of 1,471 complaints of various shareholders, whereas comments on remaining 80 complaints have been sought from the concerned companies. Complaints were mainly related to non-receipt of dividend warrants, non-encashment of dividend warrants, delay/ non-transfer of shares and issue of duplicate shares, non-receipt of annual and interim accounts and wrongful deduction of Zakat, other miscellaneous complaints relating to the non-holding of AGM, non-circulation of notice of meeting etc.
Moreover, proceedings were initiated against two companies, which failed to transfer shares and failed to prepare in the name of and deliver to the Central Depository Company of Pakistan limited physical share certificates along with transfer deeds for onward delivery of shares to the respective shareholders. Proceedings in both the matters were in process.
The commission had carried out examination of annual accounts of 961 non-listed public companies and associations not for profit. Resultantly, show cause, warning notices and explanation letters were issued to 565 companies for non-compliance with the statutory requirements, while 396 accounts were found in order.
The Commission adjudicated 4,461 cases of violation of various provisions of the Companies Ordinance and punitive actions were taken against errant companies. A total of 3,951 cases of dissolution of companies were adjudicated. Of these, 60 were wound up voluntarily and 3,891 companies were struck off from the register.
The companies which were dissolved had a paid up capital of Rs 1213.82 million. On-site inspections of 20 entities, including investment banks, leasing companies, Mutual Funds, Modarabas, and Venture Capital Funds were conducted. The on-site inspections revealed financial irregularities and misappropriation of public funds by the management's.
In addition, these inspections exposed poor corporate governance in these entities and highlighted the need for the Commission to strengthen its monitoring. During the inspection, the following common issues were identified: Excessive Trading by the fund managers; breaches of laid down investment exposure limits; excessive/undue influence of the sponsors in the affairs of the NBFCs; violations of Know Your Customers Regulations; cross investments with banks and other financial institutions; non-maintenance of proper books of accounts; incorrect and false reporting to the Commission, shareholders and other stakeholders; unsecured placements by Modarabas in violation of the regulatory framework; exposure by Modarabas in Shariah non-compliant avenues; use of resources of the Modarabas by the management and directors; significant reliance of the mutual funds industry over institutional investors; discretionary rebates of the sales load allowed by the AMC to some of the institutional & individual investors and treating them on preferential basis over other investors; involvement of executive' management and directors in fraudulent activities like issuance of company shares without rights and without the approval of the Commission and selling the same to the general public through stock exchanges; corporate governance issues such as lack of independence of the internal auditor, lack of risk management function, blurring of boundaries between the Board and the executive management and negligence of Internal and External Auditors towards the financial mismanagement by the management of the NBFCs/Companies;
Based on the findings of on-site inspections, the Commission decided to file criminal complaints against the persons responsible, in the respective High Courts, for misappropriation of public funds, mismanagement of NBFCs and making of false statements to the Commission and shareholders.
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