KARACHI: The National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA) may not probe an alleged offence pertaining to a regulated activity without a reference from the Securities and Exchange Commission of Pakistan (SECP), the Sindh High Court (SHC) has observed. The intention of legislature in introducing Section 41-B in the Securities & Exchange Commission of Pakistan (SECP) (Amendment) Act, 2016 seems clear as it specifically mentions that NAB and FIA may not probe an alleged offence pertaining to a regulated activity without a reference from the SECP, the court noted.
SHC gave these observations in two constitutional petitions filed by Ali Aslam Malik versus NAB and others. The petitioner moved the court whether NAB can file a reference in connection with a "regulated activity" without a complaint from the SECP.
The order, authored by Justice Omar Sial of the SHC dilating upon the facts of the case, stated that Properties Organisation ("APO"), a government entity, instructed a brokerage firm by the name of First National Equities Limited (FNEL) to sell its shareholding in two companies at the highest possible price. It is alleged that the FNEL didn't comply with the instruction of APO in a timely manner and as a consequence APO incurred loss.
This led to a dispute between the parties, which could not be resolved amicably, and consequently the FNEL filed a suit seeking determination of the liability of FNEL as according to FNEL, APO was demanding an exaggerated price from FNEL. The suit is pending adjudication in SHC.
APO also filed a complaint with NAB regarding the belated sale of its shares, which culminated in the filing of reference No. 34 of 2018.
Ali Aslam Malik, who is the chief executive officer of FNEL, filed the two petitions, seeking pre-arrest bail as well as to quash the reference, as according to him NAB could not have inquired into/investigated the transactions complained of without the complaint being made to it by the SECP. In support of his plea, the counsel for the petitioner relied solely on Section 41-B of the Securities & Exchange Commission of Pakistan Act 1997.
The court noted that in essence, in terms of Section 41-B, inter alia, NAB has been barred from conducting any action, inquiry, investigation or proceedings in respect of any regulated activity, regulated securities activity, transactions, process or permission as defined in Act of 1997 without the reference having been made by the SECP. The court stated that the SECP statement, furnished in the court, also admitted that no reference has been filed by the SECP in the matter of FNEL relating to misuse of claimant's (APO) shares and/or non settlement of claim by the petitioner before the NAB under Section 418 of the Securities and Exchange Commission of Pakistan Act 1997, which has been promulgated/inserted in the SECP Act 1997 through the SECP (Amendment) Act 2016 (XXXVI 2016) dated 6 August 2016. "However, SECP has provided all the assistance to the NAB and when and as required by NAB." The court viewed that the complaint filed by APO against FNEL and specially keeping in view the fact that primary dispute is whether shares were sold at "correct" time falls within the ambit of the jurisdiction of the SECP and it is best suited to determine whether the allegation is correct and tantamount to a criminal offence. The court ruled that the SECP has been given extensive powers to investigate the same and if need may file a reference with NAB. As no reference was made by the SECP in this case, the proceedings against the petitioner are void ab initio and should be quashed.
Copyright Business Recorder, 2020