Callmate, a pre-paid phone cards company, has announced to challenge in court the Security and Exchange Commission of Pakistan (SECP) decision to expel it from the stock market for two months for a row over its audit authenticity.
Callmate, the country's largest phone card outfit, has called for a National Accountability Bureau (NAB) inquiry into SECP's "cruel decision to defame the company".
The Security and Exchange Commission of Pakistan has issued a directive to all three stock exchanges of the country to suspend trading of the company's shares for 60 days.
The SECP and the company have long been in disagreement over appointment of auditors.
The regulator had expressed doubt that the company was not providing exact figures of its profit and bonus.
The SECP asked the company to accept the officially-nominated auditors, but the phone cards outfit refused the condition. This led to a severe controversy between the company and the regulator and resulted in the ban on company's shares trading in the stock exchanges.
Aitzaz Ahsan, counsel for the company, told a news conference here on Friday that the company would fight against the decision in the court. He expressed fear that thousands of company's employees would lose their jobs if the decision was not reversed.
The shareholders of the company had decided with overwhelming majority to change the auditors, he said. He added that subsequently the auditors were replaced, who had carried out audit of the company, but the SECP had rejected the company's decision of replacing the auditors.
Time and again, Aitzaz said, the company's administration had requested the SECP to accept the audit report, but the regulatory authority did not pay any heed to this appeal.
He resented that the SECP had disallowed the company to convene its general body meeting, scheduled to be held on December 31, despite the directives of concerned courts in this regard. He asked NAB to take notice in the matter and provide relief to the company.
BR Karachi correspondent adds: The Securities and Exchange Commission of Pakistan (SECP) on Friday dispatched a notification to Callmate Telips Telecom Limited (CTTL) regarding suspension trading in its shares at Karachi Stock Exchange (KSE) for 60 days with immediate effects.
The issuance of notification created a big room for bears at the local bourse, as prior to issuance of the notification on Friday, minor technical correction was witnessed in the second session at KSE, brokers said. They said that the suspension notification was issued to the Company (CTTL) in greater interest of shareholders and to save the market from any colossal loss, as was feared to occur in case trading in CTTL went on.
The scrip opened on its lower circuit breaker on Friday following upper circuit breakers witnessed for the last four or five consecutive days at Karachi Stock Exchange, brokers noted. On Friday, the scrip opened at Rs 87.50 and closed at Rs 83.15, shedding Rs 4.35.
Experts believe that suspension of trading in CTTL shares was the right step by Security and Exchange Commission of Pakistan as the scrip might have witnessed consequent lower circuit breakers in the sessions to be held.
Lower circuits might push the market below 10,000 points level, they calculated as a large number of scrips of Callmate Telips Telecom Ltd were traded through CFS (continuous funding system) in the market.
A leading broker said that sellers appeared worried following an announcement of the notification issued by SECP to Callmate Telips Telecom Ltd (CTTL) for suspending trading in its (CTTL) shares.
Security and Exchange Commission of Pakistan notification said: "CTTL had declared a bonus issue without compliance with the provisions of Rule 6 of the Companies (issue of capital) Rules, 1996 (Rules)".
However, finances have a choice to release their holding at any working session within 22 days, otherwise financiers have a right to force investors to either sell out their holding of Callmate Telips Telecom Ltd to get return back their financed money or investors pay them hard cash against the deal made through CFS, a leading broker commented.
A broker said that SECP and KSE were scared of forced selling with immediate effect witnessing likely lower circuit breakers in case if trading in Callmate Telips Telecom Ltd shares was not suspended. Now financiers have no choice, but to wait for next 22 days.
Security and Exchange Commission of Pakistan notification added, "Upon an examination of our record, we concur, that the Company has failed to comply with the said Rule 6 and has failed to provide a satisfactory explanation in this regard as sought by the Commission vide its letter dated December 4, 2006 and December 5, 2006 addressed to the Company."
The letter further said, "In view of the aforesaid, the declaration of bonus issue is prime facie contrary to the law, and the Commission is taking necessary steps to proceed against the Company for acting in violation of Rules."
It said, "In these circumstance, the Commission is satisfied that it is in the public interest to suspend the trading of the shares of the Company in order to avoid a negative impact on the on the interest of shareholders due to the effect these development are likely to have on the trading value of the shares."