Former chairman of the Securities and Exchange Commission of Pakistan (SECP), Raziur Rehman, took unilateral decisions at the time of the 2008 stock market crash, while then finance minister Shaukat Tarin influenced the decision about removing the floor on trading, reveals an inquiry report. During the 2008 market crisis, the apex regulator was functioning as a non-collegiate body and then SECP chairman Raziur Rehman, who was also the commissioner of Securities Market Division, unilaterally handled the entire situation, revealed findings of the Shamim Ahmad Khan Committee. The SECP had constituted the committee in 2012 to analyse the factors behind the crisis, but it became inactive due to Shamim Ahmad Khan’s resignation. However, current SECP Chairman Zafar Hijazi reactivated the committee, which was also asked to give policy recommendations. The report, finalised in June this year, stated that Rehman took decisions without bringing those to the notice of the full bench of commissioners and there was no discussion about the grave crisis during SECP meetings at that time. The market crash swallowed savings of many small investors. Although the report did not mention the quantum of losses, some estimates suggested that Rs1.3 trillion was wiped off the market capitalisation. The SECP has blamed the entire crisis on the single decision to place the floor, and attributed that decision to its own leadership at the time. Ascribing what was clearly a structural defect in the country’s capital markets at the time to a single decision made by a small group of people smacks of evasion of deeper responsibility. The SECP chairman says the investigators found no “concrete evidence” of the influence of brokers within its own decision-making at that time. He also said he does not wish “to waste energies on blame game and trying to see which broker made how much money in the process”. These are unfortunate statements. The role of big brokers to skew the pitch on which trading takes place has been documented. Any attempt to get at the influence that a small number of brokers have on the regulator and the capital markets would not be “wasted energies”, but a very worthwhile exercise in unearthing the facts that could then inform the subsequent reform process. One can only hope that the SECP releases the full report quickly so the public can make up its own mind whether or not a thorough effort has been made to get to the facts by the investigators. But going by the narrative released by the SECP thus far, it seems the brokers and the structural defects in the regulatory environment that create the incentives for manipulation are being given a clean chit.
pk.shafaqna.com
