ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has filed a criminal complaint against the Company Secretary of a listed company, his four close relatives, and a private limited company for their alleged involvement in insider trading. The case, based on investigations under the Securities Act, 2015, has been filed at the Special Court (Offenses in Banks), Sindh, Karachi.
According to the SECP, certain individuals acquired shares of a listed company between August 22, 2023, and October 12, 2023, using non-public information about the company’s buy-back of shares and its planned delisting. The SECP considers this insider information under the Securities Act, 2015, and the trading activity raised concerns of insider trading.
According to Profit’s investigation the company, which the SECP has not mentioned is Pak Suzuki Motor Company Limited (PSMC) and the company secretary, against whom the case has been filed is Abdul Nasir.
It is interesting to note that Abdul Nasir, who also happens to be the CFO of the company, has served at PSMC for more than 30 years, making him privy to all the developments in the company since the very beginning. The insider trading pertains to the company’s questionable share buyback which was highlighted earlier in the year by Profit.
The issue began in late 2023 when Suzuki Motor Company, the largest shareholder, proposed a voluntary delisting and buyback of shares. While the company’s financial situation was weak at the time, minority shareholders argued that the buyback was done at an unfair price, considering the potential value of the company in the future.
The buyback offer was set at Rs 406 per share, while the market had valued the shares at nearly Rs 900. Despite the discrepancy, an independent valuation by Iqbal A Nanjee & Company set the price at Rs 609, which was accepted by Pak Suzuki. Minority shareholders, dissatisfied with the offer, banded together to ensure the buyback failed unless they were offered a higher price.
The buyback was ultimately successful, but with lingering resentment from the minority shareholders, who felt their interests were overlooked. In the subsequent financial results of this calendar year’s first quarter, Pak Suzuki reported a significant rebound in profits, raising suspicions that the company may have suppressed profits prior to the buyback to lower the buyback price.
According to the SECP, the investigation revealed that the Company Secretary had access to sensitive price-influencing information due to his position and was involved in the delisting process. He allegedly shared this information with his close relatives and the CEO of an associated company, and facilitated their purchase of shares, which led to illicit profits when the prices surged after public disclosure.
The accused parties sold the shares after the public announcement, earning illicit gains totalling Rs. 338.085 million. Telling was the fact that none of the accused had a prior history of trading in the shares of the listed company.
Under the Securities Act, 2015, insider trading is a criminal offense punishable by up to three years in prison or a fine of up to Rs. 200 million, or three times the illicit gain. Profit will continue in pursuit of the story as matters of the investigation come to light, and it is requested of the readers to follow this space for a detailed investigative feature.
