ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) announced on Wednesday that it has sent letters to Federal Investigation Authority (FIA) and the Punjab government advising independent investigation in the matter of Chinese company, Yabaite.
The available information from China Securities Regulatory Commission (CSRC) will be shared with the FIA and the provincial government after getting permission from the CSRC. Moreover, additional information in the matter will be shared with them as and when received from the CSRC, a SECP announcement said.
The announcement was made after media reported that the CSRC has sought details from the SECP regarding the affairs of Yabaite Technology Company Limited / Jiangsu Yabaite Technology Company Limited (Yabaite), a company listed on the Shenzhen Stock Exchange in China. The company was alleged to have laundered millions of dollars claiming profits from mass transit, Multan Metro project in Pakistan.
The SECP said that the CSRC is not conducting any investigation into the Multan metro bus project contrary to the media reports. It also said the SECP had not withheld probe regarding this matter.
In fact, the CSRC repeatedly has thanked SECP and sought assistance from SECP in the matter of its investigation against the Yabaite for its violation of Chinese securities laws.
Further, the SECP cannot initiate any investigation in Pakistan unless the CSRC’s on-going investigation has established the violation, which links to companies or individuals in Pakistan. The CSRC confirmed that the probe into the matter is still underway.
SECP said that “based on CSRC’s existing investigation findings, they do not have any evidence showing that Yabaite has any business transactions with claimed Pakistan entities or natural person”.
As reported by the CSRC, the Yabaite China claimed that it had worked as a sub-contractor of Capital Engineering and Construction Company Limited awarded to Habib Rafiq (Pvt.) Limited, in Multan Metro Bus Project.
It is to be noted that the Capital Engineering and Construction Company is not registered with the SECP. Furthermore, the office of the construction company on the given address does not exist.
The CSRC requested SECP’s assistance in obtaining contract, agreement and tender documents and information pertaining to the metro bus project. The SECP is empowered under the section 42D of the SECP Act 1997 to seek and provide assistance to international regulators for assisting in any investigation for contravention of financial services laws.
Such international cooperation requests are, however, subject to confidentiality requirements stipulated under the SECP Act 1997 and the International Organization of Securities Commission (IOSCO)’s MMoU to which SECP is a signatory.
It is to be noted that the provisions of assistance under MMOU are internationally used by regulators for access to information in cross border enforcement matters for capital markets integrity and protection of investors.
SECP after obtaining the CSRC’s authorization to share certain segments of its request with the concerned authorities/companies in Pakistan– a requirement under the MMoU– initiated gathering the requisite information and documents from the concerned authorities, which include Punjab government for provision of information from the Multan Development Authority (MDA), Pakistan Engineering Council (PEC), State Bank of Pakistan, Federal Board of Revenue (FBR) and Yabaite (Pakistan) Construction Group Co (Pvt.) Limited (Yabaite Pakistan), and the concerned contractors of the project namely Habib Rafiq (Pvt.) Limited and Matracon Pakistan (Pvt) Limited.
SECP would like to confirm that all the mentioned departments extended their full support in this regard.
Subsequently, CSRC vide its mail in late July 2017 shared two letters that acknowledged and appreciated the Yabaite-China’s contribution in the Multan Metro Bus Project. The letters were apparently signed by Punjab Chief Minister Shehbaz Sharif, Senator Kalsoom Parveen, and Senator Mushahid Hussain Sayed and duly attested by the official of Ministry of Foreign Affairs (MoFA).
The Yabaite China produced these letters before the CSRC as evidence, in support of its alleged involvement in Multan metro bus construction project. The CSRC requested the SECP’s assistance in contacting the mentioned persons, verifying their identities, and asking them to answer certain questions.
After soliciting the approval from the commission, letters were sent out to the Punjab chief secretary, Senator Kalsoom Parveen, Senator Mushahid Hussain and MOFA secretary, seeking a response to the questions raised by the CSRC.
The chief secretary responded to SECP’s letter and communicated on behalf of the chief minister, saying the said letter was forged, while both senators also denied signing such letters. All of these responses were also shared with the CSRC.
The CSRC has not shared any of the investigation reports with SECP so far; however, the SECP has asked the authority to share its investigations so that involvement of any Pakistan-based company or individual can be ascertained.
CSRC had informed SECP on August 30 that “currently this case is still ongoing and they may not share any information before a final decision is reached and made public; and considering the confidentiality and independent nature of the CSRC investigation process, they may not share investigation report at any stage.”
Furthermore, they have confirmed that “during the investigation period of this case, the CSRC enforcement staff have never inquired, nor attempted to inquire local officials from Pakistan or any Pakistani citizens. Even if they may want to obtain inquiry records from Pakistani citizens in the future, they would request for this procedure to be conducted by SECP, as assistance under the IOSCO MMOU”.
Finally, they have also confirmed that “based on CSRC’s existing investigation findings, they do not have any evidence showing that Yabaite has any business transactions with claimed Pakistan entities or natural person”.
While rejecting the allegations emerged in the media against the SECP, it said the SECP cooperated with the CSRC when it approached the SECP in December 2016.
This is the standard modus operandi for assistance sought under the International Organization of Securities Commissions (IOSCO) cooperation protocol (MMOU).
The SECP said the Chinese regulatory authority had acknowledged its efforts in this regard contrary to media reports. So any incorrect and wrong reporting in this matter involving authorities of a foreign country could undermine the credibility of the national institutions concerned.