ISLAMABAD, Aug 15: The National Assembly Standing Committee on Finance and Revenue here on Monday constituted a five-member sub-committee to look into the report of the task force on stock market crash and subsequent action taken by the Securities and Exchange Commission of Pakistan while following the recommendations of the task force.

The sub-committee would be headed by MNA Sardar Tufail Ahmed, a meeting of the standing committee presided over by MNA Chaudhry Anwar Ali Cheema at the Parliament House decided.

The standing committee criticized the role played by the SECP in stock market crash in March, owing to which, independent analysts say, small investors suffered about $12 billion losses.

It was of the view that despite having expertise and mandate to regulate the activities of trading of stock exchanges throughout the country, the SECP did nothing to safeguard small investors against such huge losses by taking timely actions.

The standing committee observed that had the commission timely monitored the unnatural situation and activities prevailing in March, small investors would have not been deprived of their hard-earned money.

Responding to the observation of the standing committee, SECP Chairman Tariq Hassan maintained that the commission was handicapped due to flaws in the existing laws under which it was established. Despite the prevalent monitoring systems, the SECP could not initiate stern action against those brokers who were evidently involved in the manipulation of stock markets, he said.

The commission, he added, had been actively engaged in removing imperfections and distortions from the markets strictly in accordance with the charter of its duties, however, exceeding from its mandate would rather adversely affect the market.

Members of the standing committee asked the SECP chairman to follow the example of the Stock Exchange Commission of the United Kingdom that effectively monitored the ongoing activities in the market and ensured maximum security to the investors.

The committee also asked the SECP chief to gear up the implementation of administrative and policy recommendations of the task force. The task force had recommended that trading via accounts with other brokers should be barred, while fines for abuse of the rules should be set at a very high level.

The task force had suggested to the SECP to ensure the introduction of primary regulation to cover the stock exchanges’ regulatory activities. The laws related to the ability of the SECP to undertake forensic investigations and enforcement should be strengthened to enable imposition of custodial sentences for serious market abuse, the task force recommended.

The SECP chairman informed the committee that necessary steps had been taken to phase out Badla finance, which was responsible for the capital market crash in March. He said stock exchanges were being de-mutualized and a ‘Universal Client Identification’ number was being issued to every investor to track his investment activities.

He claimed that other recommendations given by the task force in its report “Review of the Stock Market Situation March 2005” were also being implemented one by one in order to avoid future market crash.

The meeting was attended by MNAs Malik Saifullah Khan Tiwana, Ms Riffat Amjad, Sardar Tufail Ahmad, Syed Naveed Qamar, Ghulam Murtaza Satti, Khalid Iqbal Memon, Mohammad Laeeque Khan, Liaqat Baloch and Sardar Ayaz Sadiq.