1. This order is in appeal No. 32 of 2012 filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 against the order dated 31/05/12 (Impugned Order) passed by the Respondent.
2. The brief facts of the case are that while reviewing the trading data of B.R.R Guardian Modaraba (BRRGM) and First Dawood Investment Bank Limited (FDIBL) during the period from 01/07/2008 to 31/01/11 (the Review Period) it was noted that trading by Mr. Mohammad Aamir (Appellant), in certain illiquid scrips through his different trading accounts, correlated with the trading of BRRGM and FDIBL. It was noted that in majority of the instances Appellant bought the scrip prior to the purchase of BRRGM and FDIBL and subsequently sold all or major portion of the same to BRRGM and FDIBL and the rest in the market at higher price around the same time BRRGM and FDIBL started buying the shares (Correlated Trading), which resulted in considerable gain to the Appellant. The details of the instances of the above mentioned trading of the Appellant is as under: {{TABLE}} Sr. No 1 Scrip Code Date Broker Bought_; Quantity (Share# L__ Sold Quantity (Shares) Mutated with BRRCM FrtiBlikg-- Bought! volume or '
Sold Q Pr ofit--.,- Its, ., 3161.> 35,066 % of Matched Bought' . e.ty t ka - 0 a rho& old to Sold ABOT 20090617 Multiline Securities (Pvt.) Ltd. 14,800 14,800 - 14,800 100.00% 20100324 - 20100325 Multiline Securities (Pvt.) Ltd. 28,000 28,000 - 28,000 84,695 - 100.00% 20101026 - 20101028 Multiline Securities (Pvt.) Ltd. 29,400 29,400 15,000 29,400 152,623 51.02% 100.00% 2 BATA 20101111 - 20101112 Multiline Securities (Pvt.) Ltd. 6,500 6,500 - 6,500 165,624 - 100.00% 3 BOC 20110104 Multiline Securities (Pvt.)
Ltd. 27,162 27,162 1 - 27,162 126,437 - 100.00% 4 COLG 20090325 Multiline Securities (Pvt.) , Ltd. 9,400 9,400- 9,400 282,376 - 100.00% 5 DAWH 20090407 Multiline Securities (Pvt.) Ltd. 27,100 27,100 - 19,100 52,373 - r 70.48% 20090413 Multiline Securities (Pvt.) Ltd. 26,000 26,000 - 25,700 67,869 - 98.85% 20090422 Multiline Securities (Pvt.) Ltd. 31,400 31,400 - 31,400 189,705 - 100.00% 20091002 Multiline Securities (Pvt.) Ltd. 16,000 16,000 - 15,993 49,035 - 99.96% 20091006 Multiline Securities (Pvt.) Ltd. 25,000 25,000 - 25,000 97,925 - 100.00% Securities and Exchange Commission of Pakistan SECP 20091014 Multiline Securities (Pvt.) Ltd. 21,469 21,469 - 20,002 60,179 - 93.17% 20091214 Multiline Securities (Pvt.) Ltd. 4,700 4,700 - 4,699 18,640 - 99.98% 20100108 Multiline Securities (Pvt.) Ltd. 50,000 50,000 128,818 - 87.08% 20100318 Multiline Securities (Pvt.) Ltd. 22,000 22,000 - 22,000 59,660 - 100.00% 20100622 - 20100624 Multiline Securities (Pvt.) Ltd. 9,550 9,550 - 9,018 67,186 - 94.43% 20100914 - 20100915 Multiline Securities (Pvt.) Ltd. 36,000 36,000 254 36,000 211,770 0.71% 1 100.00% 6 DLL 20100319 Multiline Securities (Pvt.) Ltd. ( 16,000 16,000 - 15,684 27,242 - 98.03% _.
7 EFUL 20091023 Multiline Securities (Pvt) Ltd. 12,500 12,500 - 12,500 59,713 - 100.00% -1 20091030 Multiline Securities (Pvt.) Ltd. 16,375 16,375 - 16,375 79,545 - 100.00% 8 EXIDE 20100506 - 20100513 Multiline Securities (Pvt.) Ltd. 6,296 6,296 - 6,296 44,963 100.00% 20110110 Multiline Securities (Pvt.) Ltd. 15,000 15,000 - 15,000 160,035 - 100.00% 9 GLL 20101019 - 20101022 Multiline Securities (Pvt.) Ltd. 75,414 75,414 - 50,414 16,329 - 66.85% 10 INDU 20090915 Multiline Securities (Pvt.) Ltd. 25,527 25,527 - 25,527 97,917 - 100.00% 20110119 Multiline Securities (Pvt.) Ltd. 10,000 10,000 - 10,000 104,900 - 100.00% 11 KABP 20100730 - 20100823 Multiline Securities (Pvt.) Ltd. 41,689 41,688 - 41,687 L 111,915 - 100.00% 12 MARI 20080709 First National Equities Ltd. ' 28,000 28,000 - 28,000 296,100 - 100.00% 20080714 First National Equities Ltd. 5,000 5,000 - 5,000 30,150 - 100.00% 20080729 - 20080804 H, M. Idrees H. Adam / First National Equities Ltd. 8,400 11,300 - 8,400 10,542 - 74.34% 20080808 First National Equities Ltd. 13,000 13,000 - 13,000 63,930 - _., 100.00% 20090519 - 20090520 Multiline Securities (Pvt.) Ltd. 17,400 19,000 - 19,000 57,917 - 100.00% 20090521 Multiline Securities (Pvt.) LW. 27,000 27,000 - 27,000 51,788 - 100.00% Securities and Exchange Commission of Pakistan SECP 20090701 Multiline Securities (Pvt.) Ltd, 15,000 15,000 - 13,800 30,807 - 92.00% 20090723 Multiline Securities (Pvt) Ltd. 20,000 20,000 - 17,041 31,146 - 85.21% 20090805 Multiline Securities (Pvt.) Ltd. 10,000 10,000 - 10,000 133 - 100.00% 20090914 Multiline Securities (Pvt.) Ltd, 22,000 16,000 - 15,960 71,323 - 99.75% 20090918 Multiline Securities (Pvt.) Ltd. 10,000 10,000 - 10,000 10,843 - 100.00% 13 MTL 20090318 Multiline Securities (Pvt.) Ltd. 6,500 6,500 - 6,500 41,293 - 100.00% 20090319 Multiline Securities (Pvt,) Ltd. 13,000 13,000 - I- 13,000 24,418 - 100.00% 20090513 Multiline Securities (Pvt.) Ltd. 15,000 15,000 - 14,900 61,075 - 99.33% 20090522 Multiline Securities (Pvt.) Ltd. 12,000 12,000 - 11,900 34,533 - 99.17% 20090525 Multiline Securities (Pvt.) Ltd. 11,500 11,500 - 11,500 80,700 - 100.00% 20090604 Multiline Securities (Pvt.) Ltd. 26,000 26,000 - 25,700 132,687 - 98.85% 20090626 Multiline Securities (Pvt.) Ltd. 9,900 9,900 - 9,400 - 64,055 - 94.95% /0090804 - 20090805 Multiline Securities (Pvt) Ltd. 15,500 15,500 5,000 15,500 172,901 32.26% 100.00% 20090826 - 20090827 Multiline Securities (Pvt.) Ltd. 14,000 15,000 9,476 14,000 153,712 67.69% 93.33% 20090909 - 20090910 Multiline Securities (Pvt.) Ltd. 19,000 19,000 5,000 18,957 150,335 26.32% 99.77% 20090930 Multiline Securities (Pvt.) Ltd. 19,567 19,567 - 19,567 156,485 - 100.00% 20091001 Multiline Securities (Pvt.) Ltd. 12,126 12,126 - 12,126 70,425 - 100.00% 20091007 - 20091008 Multiline Securities (Pvt.) Ltd. 13,001 13,001 - 12,578 212,226 - 96.75% 20100416 Multi line Securities (Pvt.) Ltd. 26,060 25,960 - 18,710 135,105 - 72.07% 14 NRL 20090317 Multi line Securities (Pvt.) Ltd. 18,000 18,000 - 18,000 51,928 - 100.00% 20090401 Multiline Securities (Pvt.) Ltd. 20,000 20,000 - 20,000 41,248 - 100.00% 20090408 Multiline Securities (PTA.) Ltd 25,000 25,000 25,000 75,780 - 100.00% 20090526 ( Multiline Securities (Pvt.) Istct 16,100 16,100 - 16,100 41,565 - 100.00% Securities and Exchange Commission of Pakistan 20090622 Multiline Securities (Pvt.) Ltd. 22,700 22,800 100 22,800 99,457 - 100.00% 20090717 Multiline Securities (Pvt.) Ltd. 20,000 20,000 - 20,000 78,513 - 100.00% 20090826 Multiline Securities (Pvt.) Ltd. 27,511 26,511 - 26,511 80,958 - 100.00% 20090917 Multiline Securities (Put.) Ltd. 25,000 25,000 - 25,000 21,355 - 100.00% 20100309 Multiline Securities (Pvt.) Ltd. 20,000 20,000 - 19,970 16,214 - 99.85% 15 PKGS 20080821 First National Equities Ltd. 10,000 10,000 - 10,000 30,060 -, - 100.00% H 20090313 Multiline Securities (Pvt.) Ltd. 11,800 11,800 - 9,000 34,669 - 76.27% 20090331 Multiline Securities (Pvt.) Ltd. 24,800 24,800 - 21,700 39,098 -1 - 87.50% 20090406 Multiline Securities (Pvt) Ltd. 29,800 27,000 - 27,000 82,653 - 100.00% 20090413 Multiline Securities (Pvt.) Ltd. 9,900 9,900 - 9,900 18,471 - 100.00% 20090514 Multiline Securities (Pvt.) Ltd. 36,000 36,000 - 16,300 132,626 - 45.28% 20090610 Multiline Securities (Pvt.) Ltd. 28,000 28,000 - 21,200 118,426 - 75.71% 20090825 Multi line Securities (Pvt.) Ltd. 22,362 22,362 - 22,362 70,924 - 100.00% 20090918 Multiline Securities (Pvt.) Ltd. 31,200 31,200 - 30,150 55,148 - 96.63% 20091215 Multiline Securities (Pvt.) Ltd. 45,000 45,000 - 45,000 110,428 - 100.00% 16 SEARL 20080725 First National Equities Ltd. 19,500 19,500 - 19,500 54,150 - 100.00% 20080730 First National Equities Ltd. 10,000 10,000 - 10,000 19,020 - 100.00% 20100402 Multiline Securities (Pvt.) Ltd. 35,000 35,000 - 35,000 42,810 - 100.00% 17 SGLL 20100405 ..
20100406 Multiline Securities (Pvt.) Ltd. 22,000 22,000 - 22,000 (24,656) - 100.00% 18 SHEL 20080715 First National Equities Ltd. -r 2,500 2,500 - 2,500 28,200 - 100.00% 20080722 First National Equities Ltd. 4,000 4,000 - 4,000 45,804 - 100.00% 20090403 Multiline Securities (Pvt.) Ltd. 25,000 25,000 - 25,000 91,686 - 100.00% 20090512 Multiline Securities (Pvt.) Ltd. 14,000 14,000 - 14,000 54,609 - 100.00% 20090616 Multiline Securities (Pvt.) Ltd. 10,800 12,800 - 11,700 44,705 - 91.41% 20090618 Multiline Securities (Pvt..) Ltd. 12,000 12,000 - 12,000 52,200 - --I 100.00% 20090626 Multiline Securities (Pvt.) 15,000 15,000 - 14,400 33,522 - 96.00% Securities and Exchange Commission of Pakistan SE,CP Ltd.
20090702 Multiline Securities (Pvt.) Ltd. 18,500 18,700 - 18,500 54,002 - 98.93% 19 SITC 20090312 Multiline Securities (Pvt.) Ltd. 7,500 7,500 - 7,500 64,510 - 100.00% 20101021 Multiline Securities (Pvt.) Ltd. 18,000 18,000 - 17,999 128,162 - 99.99% 20101130 Multiline Securities (Pvt) Ltd. 39,682 39,682 25,000 39,682 317,959 63.00% 100.00% 20 TI-CALL 20090409 - 20090410 Multiline Securities (Pvt.) Ltd. 10,000 10,000 - - 19,500 - 0.00% 20091007 Multiline Securities (Pvt.) Ltd. 35,000 35,000 - 35,000 31,552 - 100.00% 20091223 - 20091224 Multiline Securities (Pvt.) Ltd. 25,000 20,000 - 20,000 (1,787) - 100.00% 21 TRIPE' 20090316 Multiline Securities (Pvt.) Ltd. ' 10,000 10,000 10,000 10,000 75,000 100.00% 100.00% ,.. 20090414 Multiline Securities (Pvt.) Ltd. 32,000 32,000 - 32,000 74,926 - 100.00% 20090415 Multiline Securities (Pvt.) Ltd. 20,000 20,000 - 20,000 95,731 - 100.00% 20090424 Multiline Securities (Pvt.) Ltd. 23,000 24,500 - 24,500 112,866 - 100.00% 20090427 - 20090428 Multiline Securities (Pvt.) Ltd. 5,000 25,000 - 25,000 18,460 - 100.00% 20090512 Multiline Securities (Pvt.) Ltd. 11,000 11,000 10,000 - 48,270 90.91% - ,_. 20100415 - 20100416 Multiline Securities (Pvt.) Ltd. 40,000 40,000 - 40,000 119,431 - 100.00% .1 22 r ZTL 20100721 - 20100730 Multiline Securities (Pvt.) Ltd. 124,005 124,005 100,000 100,000 74,110 80.64% 80.64% 20101028 Multiline Securities (Pvt.) Ltd. 99,362 99,362 80,002 99,362 164,991 80.52% 100.00% {{TABLE}} Profit calculated on the basis of average buy and sell rate
3. During the Review Period, Appellant traded through his accounts with the following brokers of KSE: {{TABLE}} Sr. # -Broker's Name Client Code 1 H. M. Idrees FL Adam 385 and 404 2 Multiline Securities (Pvt) Ltd 5801 3 First National equities Ltd 703 {{TABLE}} The trading pattern of Appellant lead to suspicion that the trading was executed on the basis of prior information regarding trading decisions by BRRGM and FDIBL.
4. The Enquiry Team of the Commission which was conducting Enquiry into the affairs of BRRGM scrutinized different records and information including the telephonic records of B.R.R. Investments (Pvt.) Ltd which is a management company of BRRGM and Multiline Securities (Pvt.) Ltd. The Enquiry Team unearthed information that during the Review Period MAA was in contact with Mohammad Yousuf (MY) who was working as Equity Investment Portfolio Manager at BRRGM and was also looking after investment portfolio of FDIBL during the Review Period. The said findings showed that the MY and Appellant knew each other and were in contact during the Review Period. Moreover, the examination of Appellant and MY's bank account statements by the Enquiry Team also revealed that during the Review Period, the Appellant though his different bank accounts transferred amount of Rs.3.614 million through various cheques to MY's bank account. The details of said transactions are as follows: {{TABLE}} Sr. Date Bank No .
Branch Bank Account No. Cheque No. Amount Transferred to VT (Rs.)
1, 05/07/2008 Bank Alfalah Limited N Stock Exchange Branch, Karachi 0012-01001020 1243480 195,000
2. 12/05/2009 53029846 129,000
3. 21/05/2009 53029847 225,000
4. 12/06/2009 53029855 201,000
5. 12/06/2009 53029856 76,000
6. 24/06/2009 53029857 157,000
7. 09/07/2009 53029866 117,000
8. 05/08/2009 7 53029875 89,200
9. 08/08/2009 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1339388 150,000
10. 27/08/2009 1339396 109,800
11. 29/08/2009 MCB Bank Limited Stock Exchange Branch, Karachi 3302-7 53029877 144,000
12. 12/09/2009 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1339398 93,000
13. 15/09/2009 1339399 42,000
14. 17/09/2009 MCB Bank Limited Stock Exchange Branch, Karachi 3302-7 53029880 62,000
15. _ 03/10/2009 53029884 265,000 7
16. 28/10/2009 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1473898 205,000
17. 06/11/2009 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 40026011 49,000
18. 23/12/2009 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1473913 130,600
19. 15/01/2010 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 40026023 130,000
20. 06/04/2010 MCB Bank Limited Stock Exchange Branch, Karachi 3302-7 3115806 5,000
21. 23/04/2010 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 30823859 150,000
22. 07/05/2010 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1473924 51,000
23. 25/05/2010 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 40026049 26,000
24. 14/06/2010 Bank Alfalah Limited Stock Exchange Branch, Karachi 0012-01001020 1473932 123,000
25. 02/08/2010 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 30823867 324,000
26. 20/09/2010 MCB Bank Limited Stock Exchange Branch, Karachi 3302-7 3115823 115,000
27. 18/10/2010 Askari Bank Limited Saima Trade Tower Branch, Karachi 020101062028 31389805 251,000 Total 3,614,600 {{TABLE}}
5. The pattern of Appellant's trading, his acquaintance with MY and transfer of funds by him to MY, prima facie, transpired that the trading by the Appellant was done on the basis of confidential and material non public information, disclosed to the Appellant by MY, pertaining to the investment decisions by BRRGM and FDIBL. Since it was evident from the available record that MY in his official capacity was privy to inside information pertaining to investment decisions by BRRGM and FDIBL and thus was an insider.
6. Show cause notice (SCN) dated 20/01/12 under section 15E of the Securities and Exchange Ordinance, 1969 (Ordinance) was issued to the Appellant as to why action should not be taken against him under section 15E(3) of the Ordinance for engaging in Insider Trading. The details of the Correlated Transactions were annexed with the SCN. The Appellant was required to submit his written reply to the SCN within ten days of the date of the SCN and appear before the undersigned on 06/02/12 for hearing in the matter.
7. The Respondent dissatisfied with the response of the Appellant found the Appellant guilty of contravention of section 15(A)(I) of the Ordinance and in exercise of the powers under section 15E of the Ordinance was directed to deposit a penalty of Rs.4.500 million.
8. The Appellant has preferred the instant appeal against the Impugned Order. The Appellant's counsel has argued that: a) The correlation between the trading of the Appellant with the BRRGM and FDIBL is very insignificant and was merely a coincidence due to massive trading in the account of Appellant with BRRGM and FDIBL. The Respondent only considered few segments of the trading by the Appellant while completely ignoring his bulk trading activity. The matching of 22 scrips with BRRG or FDIBL was an insignificant fraction of total trades in 147 scrips and not a willful act on part of the Appellant. Reliance is placed on the judgment of the Appellate Bench in Appeal No .58 of 2011, wherein, the Impugned Order was set aside to the extent of penalty as the act was not willful. The Appellant and MY have been partners of a firm by the name of M/s A.Y Enterprises. Both partners have mutual business interest and have trading ties in the field of prize bonds and other commodities. The Appellant invested in prize bonds and sold in open market. The Appellant often bought prize bonds from banks and also from the Appellant and then sold them with profit. The Appellant having a good reputation in the market sold prize bonds to the Appellant on credit for a certain period. The Appellant repaid that amount to MY through his personal bank account on the instructions of MY in order to clear his liability. The Appellant had to make calls to MY through a mobile phone and sometimes on landline telephone as a reminder. The Respondent is very discriminatory in obtaining and scrutinizing the telephone record of Multiline securities (Pvt.) Ltd and BRRI. The telephone records do not come under the definition of material and "definite information" as nobody can determine the conclusion of that telephone conversation. The information gathered from telephonic conversation, therefore, does not come under the meaning of 'definite information; b) Section 15B of the Ordinance defines "inside information" and section 15D requires listed companies to disclose such inside information which directly concerns listed securities. The purpose and intent behind prohibition of insider trading is to prevent a person from making a gain or avoiding a loss by trading in listed securities based on inside information relating to such listed securities before the issue of such securities. The inside information and securities should relate to the issuer. The Appellant cannot be termed as "insider" and information relating to investment decision by BRRG and FDIBL cannot be treated as non-public price sensitive information; and c) The inquiry was initiated under section 21 of the Modaraba Companies and Modaraba (Flotation & Control Ordinance), 1980 (Modaraba Ordinance) whereas the SCN was issued under section 15 of the Ordinance which is contrary to law and without proper jurisdiction. The plain reading of section 15E of the Ordinance provides that only the Registrar is entitled to issue show cause notice. The SCN is vague and defective, therefore, the same is not sustainable at law and is declared illegal, void and non-existent. Furthermore, the addition of Chapter III-A in the Ordinance through Finance Act 2008 is ultra vires the Constitution and no action can whatsoever can be initiated on the aforesaid provision. Reliance is placed on the Honourable Supreme Court judgment of Mir Muhammad Idris vs. Federation of Pakistan cited at PLD 2011 SC 213 which states that the laws that do not fall within article 73(2) of the Constitution cannot be amended and such amendment is ultra vires the constitution. Further, Chapter III A of the Ordinance and the Impugned Order has been challenged by the Appellant in the High Court of Sindh vide civil petition No. 4079/12 and is pending adjudication.
9. The Respondent rebutted the arguments of the Appellant as follows: a) While reviewing the trading of the Appellant, his complete trading activities at KSE were analyzed. Further, the review of the Appellant's trading showed that Correlated Trading with BRRGM and First Dawood Investment Bank (FDIBL) only occurred in illiquid scrips, whereas, no such pattern was observed in his trading in liquid scrip which shows the offence under section 15 of the Ordinance was willful on part of the Appellant. The matched trading constitutes a minor percentage of the over trading volume of Appellant, however, when the trading volume in 22 illiquid scrips is considered then matched volume constitutes major percentage of the same and resulted in significant profit to the Appellant, a part of which from time to time was shared with MY. It was also observed that in most of the instances of Correlated Trading only one leg (buy side or sell side) of Appellant's trades matched with BRRGM/FDIBL, whereas, the other leg of the trades was executed in market with other market participants. The scrips in which Correlated Trading of Appellant with BRRGM and FDIBL was observed are of illiquid nature, however, significant amount of profit made in each instance clearly shows that the Correlated Trading was based on information regarding trading decision at BRRGMIFDIBL and was thoroughly planned before execution and clearly shows the intention of the Appellant and MY. In the current trading mechanism at KSE, it is not possible for an investor/trader to know the identity of the counter party, however, in order to overcome this issue the Appellant had selected scrips which were illiquid and the timing of the placement of orders by the Appellant and BRRGMIFDIBL also ensured the matching of orders.
Moreover, on most of the days of the instances mentioned in the Impugned Order the buying and selling of the Appellant and BRRGM/FDIBL constituted major portion of market volume in that scrip.
All the evidence available shows that MY has passed on inside information regarding trading decisions of BRRGM and FDIBL to the Appellant and the resultant profit was shared between the Appellant and MY. Furthermore, the SCN only stated that the Appellant and MY were in contact with each other through land line and mobile phone which shows that they knew each other and had been communicating frequently. The reference of the telephonic recording in the SCN was given only to establish relationship/link between the Appellant and MY, which the Appellant has not denied in his written reply or during the course of hearing. It is possible that the Appellant may have used other means or telephone/mobile numbers or meetings in person to communicate inside information to the Appellant. The Correlated Trading between the Appellant and BRRGM/FDIBL, however, shows that the trading as mentioned in SCN was based on inside information, provided by MY, resulting in considerable gain to the Appellant, a part of which was transferred to MY from time to time. It may also be noted that the case against the Appellant was not only established on the basis of telephone calls records but also other evidences as well. The authenticity of the evidences available on record has not been denied or challenged by the Appellant in his written reply or during the course of hearing. Further, no documentary evidence was provided which could prove that the payments to MY were made in connection with the business mentioned in the Partnership Deed i.e. tax return of the Partnership, wealth tax statement of MY or the Appellant, accounts of partnership firm, copy of statement or account opening form of the bank account in the name of partnership firm, copies of receipts, vouchers or any other documentary evidence. Therefore, the contention of the Appellant that the payments made by him to MY were based on a business transaction between them holds no merit. Furthermore, the payments were not being routed through the partnership firm; b) The initiation of proceedings under section 15 of the Ordinance does not require filing of any complaint by any shareholders or directors of the company. Furthermore, non-filing of complaint by anyone does not prove that violation of law has not occurred and the Appellant has not committed any violation. It is the prime responsibility of the Respondent to ensure that all the market participants conduct their business in a fair and transparent manner and comply with the applicable laws. From the facts available on record it is clear that the Appellant taking advantage of his position in BRRGM and FDIBL passed on inside information to MAA in violation of section 15 of the Ordinance who traded on the basis of said information and made reasonable gain which was from time to time shared with the Appellant. Section 15(B)(a) of the Ordinance is worded to cover wide range of information that may relate to listed securities which is not in public domain and is price sensitive in nature. Therefore, any information regarding trading decision by any person is price sensitive in nature. In the instant case, the Appellant was taking investment decisions on behalf of BRRGM and FDIBL and communicated the said decisions before execution. Further, if the said information regarding investment decisions of BRRGM and FDIBL would have been available publicly same would have had an effect on the price of scrips. Section 15(D) of the Ordinance requires that a listed company shall inform the public as soon as possible of inside information which directly concerns the listed securities. However, it may be noted that decisions by any investor/trader to trade in scrip is never in knowledge of the listed company. Therefore, it is entirely incorrect to restrict the scope of these provisions to information that the issuers are bound to disclose in terms of section 15D as it would defeat the intent of the law. Further, the definition of the term 'inside information' is wide enough to cover investment decisions which have an impact on the price of listed securities; and c) Pursuant to the Modaraba Ordinance, the Registrar of Modaraba has the powers to order enquiry into the affairs of any Modaraba, however, the powers under section 15 of the Ordinance have been delegated to Director (SMD) vide S.R.0.1076(1)/2010 dated 29/11/10 to initiate show cause proceedings. Moreover, the SCN was not only issued on the basis of the findings of the enquiry of BRRGM as MAA's activities in the market were being monitored well before initiation of enquiry of BRRGM and during the enquiry, the Appellant was identified. Further, it may be noted that in the judgment relied on by the Appellant, the Honourable Supreme Court of Pakistan while considering the concerns expressed by the Attorney General of Pakistan effect of the judgment on other amendments carried out through Finance Act has categorically held as under: "As for the fear expressed by the learned Attorney General, suffice it to say that no other provision either of the Act of 1974 or of any other law amended by a Finance Act having been challenged by anyone before us, this judgment will be confined to the issue involved in the present case, namely, the unconstitutionality of the amendment of section 11(3)(d) of the Act of 1974 brought about by the Finance Act, 2007." The said judgment, therefore, relied on by the Representative of the Appellant did not declare section 15 of the Ordinance to be ultra vires of the Constitution. Therefore, in absence of any findings or judgment to this effect from any superior court, section 15 of the Ordinance is valid and has the force of the law.
10. We have heard the arguments and perused the record provided to us by the parties i.e. the Appellant and the Respondent.
11. MY was working as Equity Investment Portfolio Manager at BRRGM and was also looking after investment portfolio of FDIBL during the Review Period. The Appellant and MY were both partners in a firm and had mutual business interests and the telephone records also establish the relationship between the Appellant and MY. In our view, therefore, given the close business ties between the Appellant and MY, it is certain that MY has also passed on inside information which was not in the public domain pertaining to investment decisions of BRRGM and FDIBL to the Appellant during the Review Period. Moreover, it is established on the facts of the case that the Appellant has made gains of Rs.7,736,423 million through trading in 22 illiquid scrips as produced in paragraph 2 above.
Further, Rs.3.614 million was transferred by the Appellant to MY through various cheques as produced in paragraph 4 above. The Appellant's argument that the cheques were transferred by the Appellant in order to clear MY' s liability for the prize bonds sold to him on credit holds no merit in the absence of any evidence to show that the payments made were in respect of a business transaction between the Appellant and MY. Therefore, we are of the view that the Appellant has not been able to satisfactorily convince the Bench that inside information had not been passed on to him by MY and that the Appellant had not acted on the same to make considerable gains or that the act was not a willful one.
12. Further, the above-mentioned Supreme Court of Pakistan judgment of Mir Muhammad Idris vs. Federation of Pakistan cited at PLD 2011 SC 213 relied on by the Appellant is not relevant to the facts of the instant case. The Honorable Supreme Court while deciding the referred constitutional petition restricted the application of the Judgment to the facts of the case. Relevant extract of the case law is as under: "The learned Attorney-General for Pakistan, who appeared in response to the notice issued to him in terms of Order XXVIIA, Rule 1, C.P.C. submitted that in such eventuality the danger was that the other legislation carried out under the Finance Act might be affected by such a declaration, therefore, restraint ought to be exercised. As for the fear expressed by the learned Attorney- General, suffice it to say that no other provision either of the Act of 1974 or of any other law amended by a Finance Act having been challenged by anyone before us, this judgment will be confined to the issue involved in the present case, namely, the unconstitutionality of the amendment of section 11(3)(d) of the Act of 1974 brought about by the Finance Act, 2007."
Underlined for emphasis
13. Addition of Chapter III-A in the Ordinance through Finance Act 2008 has never been adjudicated by any court of competent jurisdiction, therefore plea taken in the grounds of appeal that amendments made through Finance Acts have been declared unlawful by the Honorable Supreme Court is not applicable to the extent of the Ordinance.
14. Further, we are aware that a petition has been filed by the Appellant in the High Court of Sindh vide civil petition No 4079/12, however, the petition is still awaiting adjudication and no order has been passed restraining the Appellate Bench from conducting its proceedings.
15. In view of the foregoing, we see no reason to interfere with the Impugned Order. The Impugned Order is upheld with no order as to costs.