Oil & Gas Development Corporation - Securities and Exchange ...
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Investigation Report<br />
Callmate Telips Telecommunication Co. Ltd<br />
For the Period November 7, 2006 to December 8, 2006<br />
<strong>Securities</strong> & <strong>Exchange</strong> Commission of Pakistan<br />
<strong>Securities</strong> Market Division<br />
April 10, 2007 1
TABLE OF CONTENT PAGE<br />
1. EXECUTIVE SUMMARY 03<br />
2. CORPORATE INFORMATION OF THE COMPNAY INCLUDING<br />
LIST OF BOARD OF DIRECTORS 07<br />
3. EVENTS LEADING INITIATION OF INQUIRY 08<br />
4. METHODOLOGY ADOPTED TO CONDUCT PROBE INTO CTTL AND<br />
TRADING IN ITS SHARES 13<br />
5. DETAILED INVESTIGATION REPORT FOR EACH MAJOR PLAYER 14<br />
FINDINGS RELATED TO INDIVIDUAL MEMBERS OF THE GROUP 14<br />
MOHAMMAD AJMAL ANSARI (MAA) 18<br />
ASIM FAYYAZ QUERSHI (AFQ) 24<br />
NAVEED HAIDER BUKHARI (NHB) 30<br />
MUHAMMAD ASHRAF KHAN (MAK) 35<br />
IRFAN MEHMOOD (IM) 40<br />
HISAR ANSARI (HA) 48<br />
NADEEM AHMED KHAN (NAK) 51<br />
FIRST PAKISTAN SECURITIES LIMITED ((FPS) 54<br />
MIRZA USMAN BAIG (MUB) 59<br />
MUHAMMAD HASSAN (MH) 61<br />
FINDINGS RELATED TO BROKERS 64<br />
ORIX INVESSTMENT BANK LIMITED 65<br />
AL-HOQANI SECURITIES 70<br />
FIRST NATIONAL EQUITIES LIMITED 76<br />
SHAHID ALI HABIB SECURITIES 82<br />
NOMAN ABID SECURITIES 84<br />
FIRST CAPITAL EQUITIES LIMITED 85<br />
FIRST PAKISTAN SECURITIES LIMITED 86<br />
FINDINGS RELATED TO OTHER ACTIVE TRADING PERSONS 89<br />
JUNAID HABIB (JH) 89<br />
MUHAMMAD AQEEL (MA) 92<br />
HABIB UN NISA (HUN) 94<br />
ALISHBA NAZ (ALN) 97<br />
ABIDA NASREEN (AN) 99<br />
MUHAMMAD YASEEN (MY) 101<br />
6. REGULATORY WEAKNESSES IDENTIFIED AT KSE 104<br />
7. ANNEXURES 107<br />
April 10, 2007 2
1 EXECUTIVE SUMMARY<br />
Consequent to the unusual trading behaviour in the shares of Callmate Telips Telecom<br />
Company Ltd., (CTTL) the <strong>Securities</strong> & <strong>Exchange</strong> Commission of Pakistan (the<br />
Commission) initiated an investigation into the matter. From an analysis of the trading<br />
data, (reviewed at a broker level as well as the client level) , using Universal Identification<br />
Number database, it appeared that a group of persons (the Group) acting in concert <strong>and</strong><br />
including key officials of CTTL as well as members of the Ansari family, were involved in<br />
insider trading <strong>and</strong> price manipulation of CTTL shares.<br />
On the one h<strong>and</strong>, the price of scrip was escalated by buying large quantity of scrip on<br />
upticks, whereas, on the other h<strong>and</strong> an artificial turnover was generated by buying <strong>and</strong><br />
selling CTTL shares within the Group. The price of the scrip was manipulated by placing<br />
abnormal bids (upper locks) <strong>and</strong> offers (lower locks), during pre-open sessions. Shares<br />
were bought from various Brokerage Houses <strong>and</strong> financing was obtained through the CFS<br />
market. By generating artificial turnover as well as manipulating prices upward <strong>and</strong><br />
downward, profits were generated which were then used to acquire fresh CTTL shares.<br />
Furthermore, CFS was rolled over on a daily basis <strong>and</strong> paper profits extracted at the<br />
expense of the CFS market. As a result of these prohibited activites, by Dec 8, 2006 the<br />
Group had acquired 80.95% of the share capital of CTTL.<br />
It was observed in the course of the investigation, that a large quantity of shares <strong>and</strong> cash<br />
was being transferred from one member of the Group to another, without any apparent<br />
consideration. One of the major shareholder of CTTL, Mr. Ahmed Jamil Ansari, transferred<br />
11.5 million shares of CTTL from his investor account to the sub account of Mr. Irfan<br />
Mehmood maintained with Al-Hoqani <strong>Securities</strong> on November 8, 2006. Irfan Mehmood,<br />
brother of Mr. Imran Mehmood, CFO of CTTL, has also been found to be a key player in<br />
the Group <strong>and</strong> has been involved in price manipulation <strong>and</strong> other prohibited practices.<br />
Further, our investigation has revealed that the CFO of CTTL, Mr. Imran Mehmood, <strong>and</strong><br />
his family members have been involved in insider trading <strong>and</strong> other fraudulent practices.<br />
Mr. Syed Mehmood-ul-Hasan, the father of CFO of CTTL, has been identified by<br />
A.F.Fergusons & Co. (the ex-auditors) in their qualified draft audit report for his<br />
involvement in suspicious property related deals entered into by the management of CTTL.<br />
Mr. Irfan Mehmood, the brother of the CFO of CTTL, played an active frontline role in the<br />
insider trading <strong>and</strong> market manipulation carried out by the Group. Mr. Kamran Mehmood,<br />
April 10, 2007 3
another brother of the CFO of CTTL, has also assisted the Group in their insider trading<br />
<strong>and</strong> holds some shares of CTTL.<br />
Some brokerage houses especially Orix Investment Bank, First National Equities Ltd., First<br />
Pakistan <strong>Securities</strong> Limited <strong>and</strong> Al-Hoqani <strong>Securities</strong>, have also played an active role in<br />
this affair. They have been found to be assisting the Group in actively manipulating the<br />
market. These houses, despite having knowledge that major shareholders, <strong>and</strong> insiders of<br />
the company were involved in trading of CTTL shares acted on their behalf <strong>and</strong> assisted<br />
them in:<br />
o Engaging in a series of transactions that are reported on a public display facility to give<br />
the impression of activity or price movement in the security;<br />
o Transactions in which there is no change in beneficial ownership of the security;<br />
i.e.wash sales ;<br />
o Transactions where both buy <strong>and</strong> sell orders are entered at the same time, with the<br />
same price <strong>and</strong> quantity by different but colluding parties;<br />
o Increasing the bid for a security to increase its price; i.e buying on uptick thus<br />
manipulating the price;<br />
o Buying at increasingly higher prices, <strong>and</strong> then selling in the market (often to retail<br />
customers) at the higher prices (pumping <strong>and</strong> dumping).<br />
o Assisiting in avoiding disclosure requirements under Sec 4 of the Listed Companies<br />
(Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ord, 2002 by splitting<br />
purchase of one member of Group into two members of Group;<br />
o Arranging financing for the Group for further acquisition of the Company’s shares,<br />
These brokerage houses were also found violating various rules <strong>and</strong> regulations namely<br />
Brokers <strong>and</strong> Agents Registration Rules, 2001, KATS Regulations, General Rules &<br />
Regulations, etc.<br />
During the course of the investigation, Al-Hoqani <strong>Securities</strong> informed us that its client Irfan<br />
Mehmood, brother of the CFO of CTTL, the most active player of the Group, received 30.8<br />
April 10, 2007 4
million shares of CTTL in his sub account without any apparent consideration, during the<br />
period December 7, 2005 to December 7, 2006. Details of these transactions are as follows:<br />
Incoming deliveries Date Quantity<br />
Muhammad Siddiq Suleman Dec 7, 2005 to May 17, 2006 3,754,718<br />
Yuba Jamil CDC Inv A/c Oct 10, 2006 1,900,000<br />
Muhammad Ajmal Ansari Oct 17, 2006 435,000<br />
Ahmed Jamil Ansari CDC Inv A/c Nov 8, 2006 11,500,000<br />
Irfan Mehmood CDC Inv A/c Dec 31, 2005 to June 12, 2006 10,652,685<br />
First Dawood Inv Bank Jan 26, 2006 936,175<br />
Shahid Ali Habib Sec June 12, 2006 300,000<br />
Total 29,478,578<br />
Following are some instances of the outgoing deliveries of CTTL from Imran Mehmood’s A/c:<br />
Outgoing deliveries Date Quantity<br />
Sold in the market Jan 1, 2006 to June 30, 2006: 4,887,500 shares<br />
July 1, 2006 to Dec 8, 2006: 8,997,350 shares<br />
13,864,850<br />
Shahid Ali Habib SEC June 12, 2006 to Dec 5, 2006 1,600,000<br />
Muhammad Ajmal Ansari June 13, 2006 to Nov 10, 2006 2,275,000<br />
First Pakistan <strong>Securities</strong> Nov 16, 2006 2,000,000<br />
Irfan Mehmood Dec 7, 2006 350,000<br />
First Dawood Inv Bank June 13, 2006 1,225,000<br />
Trust Leasing Nov 28, 2006 1,640,420<br />
Naveed Bukhari (FCSC) Nov 29 & Nov 30, 2006 2,000,000<br />
Anwar Sheikh Dec 31, 2005 to June 14, 2006 320,000<br />
Total 25,275,270<br />
Like wise Orix Investment Bank (OIB) at one instance, when buying for its client Asim<br />
Fayyaz Qureshi exceeded the threshold of 10% of outst<strong>and</strong>ing capital of CTTL, divided the<br />
buying of 5,844,500 shares between two of its clients, Mr. Ajmal Ansari, CEO of CTTL, <strong>and</strong><br />
Mr. Asim Fayyaz Qureshi, to avoid disclosure under Listed Companies (Substantial<br />
Acquisitions of voting shares <strong>and</strong> takeovers) Ord, 2002 <strong>and</strong> the Companies Ordinance<br />
1984.<br />
April 10, 2007 5
Based on our review of the data <strong>and</strong> records, we have prima facie evidence that potential<br />
violation of various laws, rules, regulations <strong>and</strong> guidelines, including but not limited to the<br />
following, took place:<br />
i) Insider Trading<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A- Prohibition on stock<br />
exchange deals by insiders<br />
• Listed companies (Prohibition of Insiders Trading Guidelines, Guideline), Clause<br />
3-Prohibition on dealing, communicating or counseling by insiders<br />
ii) Price Manipulation, wash trades, market manipulation<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) Prohibition of fraudulent acts, etc.<br />
iii) Substantial acquisition of shares in excess of 10%, <strong>and</strong> 25% without disclosure<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ord,<br />
2002<br />
iv) Companies Ordinance 1984 – S-222 Submission of statements of beneficial owners of<br />
listed securities, <strong>and</strong> S-224 Trading by directors, officers <strong>and</strong> principal shareholders.<br />
v) Broker acted in collusion with the clients to manipulate the market <strong>and</strong> the price of<br />
CTTL shares <strong>and</strong> were an active party to insider trading being perpetuated by CEO<br />
& CFO of CTTL.<br />
• Brokers <strong>and</strong> Agents Registration Rules, 2001- R-12 Brokers to abide by code<br />
of conduct which specifically states that they shall not violate any law of the<br />
l<strong>and</strong>.<br />
vi) KSE Regulations with respect to short selling under ready market 2002, KATS<br />
Regulations <strong>and</strong> General Rules & Regulations of KSE<br />
Please refer to Annexure 11 for relevant text of the various laws identified above.<br />
April 10, 2007 6
2. CORPORATE INFORMATION OF THE COMPNAY INCLUDING LIST OF BOARD<br />
OF DIRECTORS<br />
List of Directors <strong>and</strong> officials of the Company as at June 30, 2005 is given below:<br />
Name of Directors<br />
Mr. Ahmad Jamil Ansari<br />
Mr. Mohammad Ajmal Ansari<br />
Yuba Jamil Ansari<br />
Maria Jamil Ansari<br />
Abu Shamim Muhammad Ariff<br />
Hasan Jamil Ansari<br />
NB: Shareholding of CTTL is given in Annexure 5.<br />
Chief Executive<br />
Mr. Mohammad Ajmal Ansari<br />
Chief Accountant<br />
Mr. Imran Mehmood<br />
Secretary<br />
S.M. Mehbob<br />
Legal Advisor<br />
Ahmed Adnan & Qazi Associates<br />
List of Directors <strong>and</strong> officials of the Company as at January 5, 2007 is given below:<br />
Name of Directors<br />
Mr. Ahmad Jamil Ansari<br />
Mr. Mohammad Ajmal Ansari<br />
Hasan Jamil Ansari<br />
M. Imran Mehmood<br />
General (Rtd.) Safdar Ali Khan<br />
M. Tariq Rangoonwala<br />
Mr. Nadeem Ahmed<br />
April 10, 2007 7
3. EVENTS LEADING TO INITIATION OF ENQUIRY<br />
3.1 An unusual trading pattern was observed in Callmate Telips Telecommunication<br />
3.2<br />
Price (Rupees)<br />
Limited (CTTL) during the month of November, 2006 <strong>and</strong> in the first week of<br />
December 2006 when unprecedented volumes in the scrip along with upper price caps<br />
followed by lower price caps were frequently witnessed usually within few minutes of<br />
start of trading. A graphical representation of this activity is provided below.<br />
120.00<br />
100.00<br />
80.00<br />
60.00<br />
40.00<br />
20.00<br />
0.00<br />
Callmate Telips - Price & Volume<br />
1-Nov<br />
2-Nov<br />
3-Nov<br />
6-Nov<br />
7-Nov<br />
8-Nov<br />
10-Nov<br />
13-Nov<br />
14-Nov<br />
15-Nov<br />
16-Nov<br />
17-Nov<br />
20-Nov<br />
21-Nov<br />
22-Nov<br />
23-Nov<br />
24-Nov<br />
27-Nov<br />
28-Nov<br />
29-Nov<br />
30-Nov<br />
1-Dec<br />
4-Dec<br />
5-Dec<br />
6-Dec<br />
7-Dec<br />
8-Dec<br />
Volume Price<br />
For trading sessions during November 1, 2006 <strong>and</strong> December 8, 2006, the scrip hit the<br />
upper circuit breaker 14 times including in 11 consecutive<br />
sessions during the period<br />
November 17, 2006 to December 4, 2006. The scrip price increased from Rs. 49.35 on<br />
November 01, 2006 to Rs. 101.95 by close of trading on December 04, 2006, i.e. 106.6%<br />
increase in share price during the period. It was also observed that the average daily<br />
volume increased to 4.68 million shares during November 01 to December 04, 2006 as<br />
compared to average daily volume of 2.24 million shares for the month of October<br />
2006. Annexure 1 contains price <strong>and</strong> volume trends during the period under review.<br />
April 10, 2007 8<br />
17.50<br />
15.75<br />
14.00<br />
12.25<br />
10.50<br />
8.75<br />
7.00<br />
5.25<br />
3.50<br />
1.75<br />
0.00<br />
hares in millions)<br />
lume (S<br />
Vo
3.3 Review of<br />
the trading data of top 20 volume leader Members in the scrip for the period<br />
November 7, 2006 to December 8, 2006 also shows, that significant volumes of the scrip<br />
were concentrated among few brokerage houses namely First National Equities<br />
Limited, Orix Investment Bank (Pak) Ltd, Al-Hoqani Sec. & Inv. Cor. (Pvt) Ltd &<br />
Shahid Ali Habib <strong>Securities</strong> (Pvt) Ltd, comprising 72% of the buy side volume of<br />
market during the period under review. Similarly Orix Investment Bank (Pak) Ltd, Al-<br />
Hoqani Sec. & Inv. Cor. (Pvt) Ltd, First National Equities Limited First Capital Equities<br />
Limited comprise 62% of the sale side volume of market. Please see Annexure 2 for<br />
details of the top 20 buyer Members <strong>and</strong><br />
Seller Members.<br />
3.4 An abnormal situation was also observed in the CFS market during the period under<br />
review. The CFS volume in CTTL shares as on November 14, 2006 stood at 4.63 million<br />
shares valued at Rs. 0.25 billion, however, leveraging in CTTL shares reached its peak<br />
on December 06, 2006 when it touched 37.99 million in CTTL shares with underlying<br />
value of Rs. 3.49 billion. Please see Annexure 3 for CFS figures during the period under<br />
review.<br />
3.5 The CFS position as at December 8, 2006 was also concentrated among few brokerage<br />
houses as financees. For instance, First National Equities Ltd (Quantity 12.66m shares<br />
<strong>and</strong> Rs.1.1b), Orix Investment Bank (Quantity 7.1m shares <strong>and</strong> Rs.0.58b), Shahid Ali<br />
Habib <strong>Securities</strong> (Quantity 6.6m shares <strong>and</strong> Rs.0.67b) <strong>and</strong> Motiwala <strong>Securities</strong><br />
(Quantity 3.9m shares <strong>and</strong> Rs.0.39b) accounted for 89% of total market. Please see<br />
Annexure 4 for top 10 Financiers <strong>and</strong> Financees.A Graph given below provides date<br />
wise CFS volume <strong>and</strong> value as under:<br />
April 10, 2007 9
Volume - Mln Shares<br />
3.5<br />
3.6<br />
40.00<br />
35.00<br />
30.00<br />
25.00<br />
20.00<br />
15.00<br />
10.00<br />
5.00<br />
0.00<br />
14-Nov-06<br />
15-Nov-06<br />
16-Nov-06<br />
17-Nov-06<br />
20-Nov-06<br />
21-Nov-06<br />
CTTL-CFS Value & Volume<br />
November 14 - December 08, 2006<br />
22-Nov-06<br />
23-Nov-06<br />
24-Nov-06<br />
27-Nov-06<br />
28-Nov-06<br />
29-Nov-06<br />
30-Nov-06<br />
1-Dec-06<br />
CFS Volume CFS Value<br />
The un-audited financial statements of CTTL for the year ended June 30, 2006 revealed<br />
that it had a paid up capital of 65,366,330 shares. The company vide its letter dated<br />
August 9, 2006 to the Karachi Stock <strong>Exchange</strong> declared the free float of the company to<br />
be 41,417,272 shares i.e. 63.36% of its outst<strong>and</strong>ing capital. The CFS financing figures<br />
were therefore significantly unusual as this show that 91% of the free float was<br />
financed through CFS as on December 06, 2006.<br />
The total book entry shares of the company available in the Central Depository System<br />
on December 8, 2006 were 64,947,011 shares. While reviewing CTTL ownership status<br />
as at December 8, 2006, obtained from CDC, names of major shareholders i.e., sponsors,<br />
reported in the last published accounts were not found. This information gives rise to a<br />
doubt that perhaps sponsors have sold their shareholding or have refinanced the same<br />
in the CFS market or are being held by some other person(s). It may be noted that as<br />
per the printed audited accounts of the company for the year ended June 30, 2005 the<br />
Ansari family <strong>and</strong> their associates<br />
owned 55% of the share capital (please see Annexure<br />
5 for details) . According to the details available with us, the Ansari family together<br />
with a Group indulged in substantial buying <strong>and</strong> selling of CTTL shares <strong>and</strong> presently,<br />
the Ansari family <strong>and</strong> their close associates have directly or indirectly acquired voting<br />
shares<br />
of CTTL, individually or through group of persons acting in concert i.e. the<br />
Group, approximately 80.95% shares of CTTL (for details see para 3.8 below). Majority<br />
of this holding is either being refinanced in the CFS market or held by institutions<br />
against repo financing extended to the Ansari family <strong>and</strong> the Group.<br />
April 10, 2007 10<br />
4-Dec-06<br />
5-Dec-06<br />
6-Dec-06<br />
7-Dec -06<br />
8-Dec -06<br />
4.00<br />
3.50<br />
3.00<br />
2.50<br />
2.00<br />
1.50<br />
1.00<br />
0.50<br />
0.00<br />
Value - Rs. Billion.
3.7 Furthermore, as stated above, upper price locks were observe d on daily basi s as soon<br />
as the market opened. Bid/offer data during the period under review was examined<br />
for the pre-open trading <strong>and</strong> trading sessions. Review of pre-open trading sessions fo r<br />
the period under review shows that price of CTTL shares was influenced by a Group<br />
of<br />
persons, as identified in this report. For instance, M r. Naved Haider Bukhar i put 16<br />
orders each amounting to 200,000<br />
shares at upper circuit breaker level in pre-open<br />
session on December 4, 2006 aggregating to 3.20 millio n shares ( i.e. 7.7% of free<br />
float of<br />
CTTL shares). Prima facie, the purpose of putting such bulk ord ers was to lock th e<br />
market on a higher lock level. Like wise, same Grou p of persons w ere found involve d<br />
in creating selling pressure in the market; for instance Mr. Naveed H aider Bukhari on<br />
Dec 8, 2006 placed 10 bulk quantities<br />
orders each amounting to 25, 000 shares<br />
aggregating 2.25 million shares<br />
(5.4% of free float of CTTL shares). The purpose of<br />
putting such bulk orders was to lock the market on a lowe r level circuit breaker. Please<br />
refer Annexure 9 for more details <strong>and</strong> instanc es where price of the scrip<br />
was influenced<br />
by the identified Group by putting orders in bulk quantities at upper<br />
<strong>and</strong> lower locks<br />
on various trading days.<br />
3.8 Based on our investigation, beneficial interest of Ansari Fami ly <strong>and</strong> the Group of<br />
associate persons (Group), CTTL stock as at D ecember 8 , 2006 as reported in CDC, is as<br />
follows:<br />
Client Name<br />
Shares in Shares<br />
CFS CDS<br />
Shares Under<br />
Repo<br />
Arrangement<br />
Total<br />
Interest<br />
Ansari Family & Group of associated persons - - -<br />
Ahmad Jamil Ansari – Chairman CTTL 206,709 - 206,709 0.32<br />
Mohammad Ajaml Ansari-Chief Executive CTTL 4,377,100 66,500 - 4,443,600 6.79<br />
Hasan Jamil Ansari-Director CTTL - - -<br />
Yu ba Jamil Ansari- Director CTTL - - -<br />
Maria Jamil Ansari- Director CTTL - - -<br />
Nuzhat Ikramullah - - -<br />
Abu Shamim M. Arif - - -<br />
Interglobe Commerce Pakistan Pvt Ltd.<br />
First Pakistan <strong>Securities</strong> (Trading from various KSE<br />
- - -<br />
Brokers for Irfan Mehmood; brother of CFO CTTL) 4,818,500 - 450,000 5,268,500 8.06<br />
Irfan Mehmood, brother of CFO CTTL<br />
M. Ashraf Khan, who has named CFO CTTL as his<br />
1,500,000 3,097,191 9,331,801 13,928,992 21.31<br />
nominee in account opening form 3,524,900 2,360,500 3,845,000 9,730,400 14.88<br />
Asim Fayyaz Qureshi 5,828,400 618,100 6,446,500 9.86<br />
Nadeem Ahmad Khan, legal advisor of CTTL 1,055,800 60,100 - 1,115,900 1.70<br />
April 10, 2007 11<br />
%
Naveed Haider Bukhari 6,331,600 - - 6,331,600 9.69<br />
Muhammad Hasan 3,665,000 3,665,000 5.60<br />
Kamran Mehmood (Brother of CFO of CTTL) - - 2,400,000 2,400,000 3.67<br />
Sub total 1 27,436,300<br />
Other major shareholders<br />
10,074,100 16,026,801 52,917,201 80.95<br />
Junaid Habib 1,500,000 1,500,000 2.29<br />
Muhammad Aqeel 3,900,000 3,900,000 5.96<br />
Sub total 2 5,400,000 - 5,400,000 11.14<br />
TOTAL 32,836,300 10,074,100 16,026,801 58,937,201 90.16<br />
Total Share capital as at June 30, 2006 was 65,366,330 shares<br />
3.9 During the review period there were strong rumors in the market that an offshore<br />
Saudi investor is making a bid to acquire CTTL shares. Please see Annexure 7 for<br />
Market Research Reports for relevant references. Additionally, there was some<br />
reported conflict between the statutory auditors of the company M/s A.F. Ferguson<br />
<strong>and</strong> the management over qualifications in the audit report on the financial statements<br />
for the year ended June 30, 2006. Furthermore, the company without following through<br />
with the legal requirements declared bonus <strong>and</strong> cash dividend on Dec 1, 2006. Senior<br />
officials of the company knew about these developments <strong>and</strong> were hence insiders as<br />
they had access to the unpublished price sensitive information.<br />
3.10 All above facts coupled with market rumors that major shareholders <strong>and</strong> management<br />
of CTTL were actively involved in trading in CTTL shares provided reasonable ground<br />
to SECP for initiating a probe into the trading of CTTL shares for the period November<br />
7, 2006 to December 8, 2006.<br />
April 10, 2007 12
4. METHODOLOGY ADOPTED TO CONDUCT INVESTIGATE THE AFFAIRS OF CTTL<br />
4.1 For purposes of this inquiry, following data was used:<br />
• Ready <strong>and</strong> CFS market trading data from the Karachi Stock <strong>Exchange</strong>, including<br />
bids <strong>and</strong> offer data.<br />
• CDS data from Central Depository Company of Pakistan Ltd including beneficial<br />
ownership statements, <strong>and</strong> account activity reports.<br />
• Back office records from Brokerage houses including account opening forms <strong>and</strong><br />
NIC copies of each entity <strong>and</strong> evidence of receipt <strong>and</strong> payment instruments.<br />
• Universal Identification Number database that provides a map for each investor, on<br />
a national level, irrespective of the exchange or the brokerage houses from which<br />
the investor trades.<br />
4.2 Using UIN database, investors having significant turnover during the period under<br />
review were identified. It became apparent that significant volumes were concentrated<br />
amongst few Persons/Investors. First Pakistan <strong>Securities</strong> Limited (acting on account of<br />
Irfan Mehmood), Irfan Mehmood <strong>and</strong> Muhammad Ajmal Ansari comprised 62% of the<br />
total buyers in the market during the period under review. Similarly Irfan Mehmood,<br />
Muhammad Ajmal Ansari, Asim Fayyaz Qureshi <strong>and</strong> First Pakistan <strong>Securities</strong> Ltd<br />
comprised 51% of the total market sale activity. Please see Annexure 7 for top 20<br />
buyers <strong>and</strong> seller clients during the period under review.<br />
4.3 Furthermore, bid/ order data during the period under review was examined for the<br />
pre-open trading <strong>and</strong> trading sessions. Review of pre-open trading sessions for the<br />
period under review shows that price of the CTTL was influenced by the Group. For<br />
instance, Mr. Naved Haider Bukhari put 16 orders each amounting to 200,000 shares at<br />
upper circuit breaker level in pre-open session on December 4, 2006 aggregating to 3.20<br />
million shares (i.e. 7.7% of free float of CTTL shares). Prima facie, the purpose of<br />
putting such bulk orders was to lock the market on a higher lock level.<br />
4.4 Like wise, same Group of persons were found involved in creating selling pressure in<br />
the market; for instance Mr. Naveed Haider Bukhari on Dec 8, 2006 placed 10 bulk<br />
quantities orders each amounting to 25,000 shares aggregating 2.25 million shares (5.4%<br />
of free float of CTTL shares). The purpose of putting such bulk orders was to lock the<br />
market on a lower level circuit breaker. Please refer Annexure 9 for further details.<br />
April 10, 2007 13
5 DETAILED INVESTIGATION REPORT FOR EACH MAJOR PLAYER<br />
We identified various investors, including Officials of CTTL, <strong>and</strong> a number of brokers, who<br />
appeared to be involved in prohibited fraudulent trading activities including making<br />
fictitious quotations, creating false <strong>and</strong> misleading appearance of active trading activity in<br />
the scrip; in addition to other grave violations of laws <strong>and</strong> regulatory framework. Our<br />
findings have been Grouped as hereunder:<br />
5.1 Findings related to Individual Members of the Group<br />
5.2 Findings related to Brokers<br />
5.3 Findings related to KSE<br />
5.1 FINDINGS RELATED TO INDIVIDUAL MEMBERS OF THE GROUP<br />
A number of persons acting in concert were engaged in buying <strong>and</strong> selling of CTTL shares <strong>and</strong><br />
were found to be a part of a Group centered around the MD <strong>and</strong> CFO of CTTL. This Group<br />
was involved in trading in the scrip, artificially generating turnover <strong>and</strong> hype in the market<br />
place, manipulating the price of the scrip so that it doubled in a period of one month. Member<br />
of this Group were also involved in manipulating the price of CTTL shares by putting<br />
unusually high bids <strong>and</strong> offers at its higher <strong>and</strong> lower circuit breaker limits during pre-open<br />
market sessions <strong>and</strong> during trading hours.<br />
Members of this Group are:<br />
1. Mr. Mohammad Ajmal Ansari (MAA), the CEO of CTTL, traded through OIB(OIB)<br />
2. Mr. Asim Fayyaz Qureshi (AFQ) traded through OIB <strong>and</strong> First National Equities Limited<br />
(FNEL). He was introduced to OIB by the CFO of CTTL. While reviewing Account opening<br />
form of AFQ with FNEL, we noted that AFQ has nominated Mr. Muhammad Ashraf Khan<br />
as his nominee.<br />
3. Mr. Muhammad Ashraf Khan (MAK) was introduced by the CFO of CTTL to OIB. While<br />
reviewing his account opening form with OIB, we noted that MAK has nominated the CFO<br />
of CTTL, Mr. Imran Mehmood as his nominee. This clearly shows that MAK is a front for<br />
the CFO of CTTL. MAK trades through OIB <strong>and</strong> FNEL.<br />
4. First Pakistan <strong>Securities</strong> Limited (FPSL) is a member of the Lahore Stock <strong>Exchange</strong> <strong>and</strong> is a<br />
major shareholder of FNEL, a member of KSE. FPSL trades through OIB <strong>and</strong> FNEL. While<br />
reviewing records received from FPSL it was noted that almost all the trading in CTTL has<br />
been done by FPSL on account of his client Irfan Mehmood.<br />
April 10, 2007 14
5. Naveed Haider Bukhari (NHB) trades through Shahid Ali Habib <strong>Securities</strong> Ltd, Noman<br />
Abid & Company <strong>and</strong> First Capital Equities Ltd.<br />
6. Irfan Mehmood (IM) is the brother of CFO of CTTL, Mr. Imran Mehmood. IM is a client of<br />
Al-Hoqani <strong>Securities</strong>.<br />
7. Hisar Ansari (HA) trades through Foundation <strong>Securities</strong> <strong>and</strong> based on the documents<br />
reviewed we believe that he is a front for Al-Hoqani <strong>Securities</strong>. On inquiry from the CEO of<br />
Al-Hoqani <strong>Securities</strong> we have been informed that HA has been trading on instructions of<br />
IM.<br />
8. Nadeem Ahmed Khan (NAK) is the legal advisor of CTTL. NAK trades through OIB.<br />
Evidence suggests that NAK was also using another person Mr. Tariq Jawed for trading in<br />
CTTL.<br />
9. Muhammad Hassan (MH) is a client of Moosa Noor Muhammad Shahzada & Co.<br />
however, payments on his behalf were made by IM.<br />
10. Mirza Usman Baig (MUB) is the client of Sherman <strong>Securities</strong>. In his account opening form<br />
he has nominated Mr. Kamran Mehmood S/o Syed Mehmood Ul Hasan <strong>and</strong> brother of<br />
CTTL CFO, as his nominee.<br />
April 10, 2007 15
We noted that during the period under review almost all the turnover of the market was concentrated among this Group. Summary of wash trades/ circular trades amongst the Group, for the period<br />
under review is given below:<br />
Date<br />
MAA NHB IM<br />
FPS A/c IM AFQ MAK NAK<br />
MH HA MUB Total Total<br />
Market<br />
Turnover<br />
Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale Buy Sale<br />
7-Nov 0 0 0 0<br />
0 870,500 0 1,000<br />
0 0 830,700 0 455,900 0 0 0 0 0 1,286,600 871,500 6,640,900 19.37<br />
8-Nov 0 0 0 0 185,000 185,000 0<br />
0 0 0 532,300 1,000 0 0 0 0 0 0 717,300 186,000 2,826,900 25.37<br />
13-Nov 0 0 0 0 0 800,000 0 0 0 0 1,440,700 0 0 0 0 0 0 0 1,440,700 800,000 2,838,500 50.76<br />
14-Nov 0 0 0 0 854,100 77,000 0 0 0 0 0 0 0 0 0 0 0 0 100,000 35,000 954,100 112,000 2,450,900 38.93<br />
15-Nov 0 0 0 0 75,000 145,000<br />
0 0 0 0 0 0 0 0 0 0 0 0 0 15,000 75,000 160,000 2,624,600 2.86<br />
16-Nov 2,000,000 0 0 0 0 1,502,000 38,500 0 0 0 0 0 0 0 0 0 0 0 30,000 50,000 2,068,500 1,552,000 6,022,600 34.35<br />
17-Nov 1,575,200 0 0 0 400 2,730,000 5,395,500 88,400 0 0 0 0 0 0 0 0 0 0 483,900 513,900 7,455,000 3,332,300 12,585,300 59.24<br />
20-Nov 400 0 0 0 1,200 0 600 0 0 0 0 0 0 0 0 0 0 0 2,200 0 690,900 0.32<br />
21-Nov 0 0 0 0 224,100 0 700 0 0 0 0 0 0 0 0 0 0 0 224,800 0 586,100 38.36<br />
22-Nov 0 0 0 0 282,200 0 89,400 0 0 0 0 0 0 0 0 0 0 0 371,600 0 1,614,700 23.01<br />
23-Nov 404,000 0 0 0 191,800 0 169,000 100 0 0 0 0 0 0 0 0 0 0 764,800 100 1,996,800 38.30<br />
24-Nov 0 0 0 785,100 0 227,100 0 0 0 0 0 0 0 0 0 0 0 1,012,200 0 1,839,500 55.03<br />
27-Nov 0 2,000,000 0 0 1,000 0 0 0 2,000,000 0 0 0 0 0 0 0 0 0 2,001,000 2,000,000 2,890,300 69.23<br />
28-Nov 0 0 0 2,000,000 800,800 0 2,001,000 1,219,000 2,719,600 0 0 0 0 0 0 0 0 5,521,400 3,219,000 7,204,000 76.64<br />
29-Nov 0 0 0 0 500,000 0 0 25,000 7,294,300 0 0 0 160,000 0 0 0 0 250,000 0 6,500 7,954,300 281,500 10,518,600 75.62<br />
30-Nov 575,000 0 0 1,000,000 224,800 0 1,622,500 575,000 1,000,000 0 0 8,000 0 0 0 0 0 0 3,422,300 1,583,000 4,568,500 74.91<br />
1-Dec 2,078,300 0 574,500 0 3,489,200 0 1,165,500 25,000 3,000,400 0 0 3,000 0 0 0 0 0 1,276,300 10,307,900 1,304,300 15,376,600 67.04<br />
4-Dec 0 642,600 7,000,000 0 2,600,000 0 0 2,800,000 0 5,212,000 0 0 0 0 2,400,000 0 0 0 12,000,000 8,654,600 15,554,200 77.15<br />
5-Dec 0 4,496,800 500,000 0 0 1,000,000 25,000 600,000 0 1,450,800 0 0 0 0 0 0 0 0 525,000 7,547,600 8,769,500 5.99<br />
6-Dec 3,440,600 0 0 0 107,300 3,280,300 0 0 0 0 0 0 0 0 0 0 0 0 3,547,900 3,280,300 5,823,400 60.92<br />
7-Dec 0 0 0 0 0 18,100 0 1,200 0 0 0 0 0 0 0 0 -<br />
8-Dec 0 0 0 1,100 0 6,200 0 0 0 0 0 0 0 0 0 0 -<br />
Total 10,073,500 7,139,400 8,074,500 3,000,000 10,322,000 10,589,800 10,734,800 5,333,500 16,014,300 6,662,800 2,803,700 12,000 615,900 0 2,400,000 0 0 1,526,300 613,900 620,400 61,652,600 34,884,200 113,422,800 54.36<br />
MAA Mohammad Ajmal Ansari MAK Muhammad Ashraf Khan<br />
NHB Naveed Haider Bukhari NAK Nadeem Ahmed Khan<br />
IM Irfan Mahmood MH Mohammad Hasan<br />
FPS First Pakistan <strong>Securities</strong> Limited HA Hisar Ansari<br />
AFQ Asim Fayyaz Quershi MUB Mirza Usman Baig<br />
19,300<br />
7,300<br />
322,700<br />
75,600<br />
Group Activity<br />
as % to Total<br />
Market<br />
Given below is the diagram showing working of Group in terms of movement of cash <strong>and</strong> securities among them. Please note that most of the Group members opened their accounts with the<br />
brokerage houses over the past 2-3 months <strong>and</strong> traded solely in CTTL shares.<br />
April 10, 2007 16 16<br />
-<br />
-<br />
13.12<br />
6.58<br />
28.18<br />
4.57<br />
6.10<br />
25.77<br />
26.48<br />
-<br />
-<br />
-<br />
0.01<br />
-<br />
69.20<br />
44.68<br />
2.68<br />
34.65<br />
8.48<br />
55.64<br />
86.07<br />
56.33<br />
5.98<br />
9.66<br />
30.76
M. Ajmal Ansari<br />
Orix Inv. Bank<br />
First Nation Equity<br />
(FNE)<br />
First Pakistan <strong>Securities</strong> (trading on<br />
account of Irfan Mehmood)<br />
ORIX<br />
M. Ajmal Ansari<br />
Investor A/C<br />
OIB-ORIX<br />
M. Ashraf Khan<br />
(his nominee is CFO of CTTL)<br />
ORIX, FNE<br />
Asim Fayyaz Qureshi<br />
FNE, ORIX<br />
Neveed Haider Bukhari<br />
SAH, Noman Abid, FCE<br />
Tariq Javed<br />
ORIX<br />
* For onward credit of FPSL A/c maintained with FNE<br />
** CFS Financing provided by FNE to MAK<br />
*** CFS Financing provided by FNE to MAK<br />
**** In settlement of FPSL trades with FNE <strong>and</strong> on FPSL instructions<br />
WORKING OF THE GROUP<br />
Ahmed Jamil Ansari<br />
Investor A/C<br />
Hisar Ansar<br />
Foundation Sec.<br />
Yuba Jamil<br />
Investor A/C<br />
Irfan Mehmood<br />
(Brother of CFO - CTTL)<br />
Al-Hoqani <strong>Securities</strong><br />
Nadeem Ahmed Khan<br />
All Sale proceeds<br />
Muhammad Hasan<br />
Moosa Noor M. Shahzada<br />
Al-Hoqani <strong>Securities</strong><br />
Cash paid for purchase of shares of shares cover all purchases<br />
(Hisar Ansari was selling shares on behalf of Irfan Mehmood)<br />
The transfer of money <strong>and</strong> shares between the different persons within the Group is clear indication that they are acting in concert.<br />
17
5.1.1 MOHAMMAD AJMAL ANSARI (MAA) - Group Member:<br />
MAA<br />
is the CEO of CTTL <strong>and</strong> is also a Director on the board of the company. MAA opened the account<br />
with<br />
OIB on November 08, 2006 <strong>and</strong> traded only in CTTL shares. The trading in his account started on<br />
November<br />
16, 2006. Total share position of MAA as at December 8, 2006 shows:<br />
Shares<br />
in Shares under Shares financed under Repo Total % age of total paid<br />
CDS CFS<br />
Arrangement<br />
Holding up capital<br />
66,946 4,377,100 0 4,444,046 6.79%<br />
5.1. 1.1 Trading Pattern in Ready Market<br />
During<br />
the period under review, trading pattern of MAA in Ready <strong>and</strong> CFS Market is as follows:<br />
Date<br />
16 Nov 2006<br />
Open CFS<br />
Position<br />
-<br />
17 Nov 2006 2,000,000<br />
20 Nov 2006 3,575,200<br />
21 Nov 2006 3,575,200<br />
22 Nov 2006 3,575,200<br />
Ready<br />
Buy<br />
Volume<br />
Ready Sale<br />
Volume<br />
22 Nov 2006 C to C 1,500,000<br />
23 Nov 2006 2,075,200<br />
24 Nov 2006 2,479,200<br />
27 Nov 2006<br />
479,200<br />
27 Nov 2006 C to C 1,885,000<br />
Avg.<br />
Price Buy Value Sale Value<br />
CFS<br />
Financee<br />
Qty. Open<br />
position<br />
Total<br />
Ready<br />
Market<br />
Volume<br />
2,000,000 - 56.40 112,799,593 - 2,000,000 6,022,600<br />
1,575,200 - 59.73 94,087,116 - 3,575,200 12,585,300<br />
400 - 62.80 25,120 - 3,575,200 690,900<br />
-<br />
-<br />
-<br />
-<br />
- - - 3,575,200<br />
- - - 2,075,200<br />
404,000 * - 72.60 29,330,400 - 2,479,200 1,996,800<br />
- - - - 479,200<br />
- 2,000,000 80.00 - 160,000,000 479,200 2,890,300<br />
29 Nov 2006 479,200 2,944,500** - - 3,423,700 10,518,600<br />
30 Nov 2006 3,423,700<br />
01 Dec 2006 3,998,700<br />
04 Dec 2006 6,077,000<br />
05 Dec 2006 5,433,000<br />
06 Dec 2006<br />
Total<br />
936,500<br />
Buy – Sale = 2,493,600 shares<br />
575,000 - 92.60 53,245,000 - 3,998,700 4,568,500<br />
2,078,300 - 97.02 201,633,450 - 6,077,000 15,376,600<br />
- 642,600 101.94 - 65,507,376 5,433,000 15,554,200<br />
- 4,496,800 97.79 - 439,732,239 936,500 8,769,500<br />
3,440,600 - 92.53 318,363,255 - 4,377,100 5,823,400<br />
13,018,000 10,524,400 809,483,934 665,239,615<br />
* NB1: On 23-11-06, the buy volume is 404,000, but recorded at 350,000 in the statement given by Orix.<br />
18
** NB 2: In this instance, AFQ bought 5,844,500 shares of CTTL from OIB<br />
on Nov 29, 2006. In order to<br />
avoid the disclosure as required under Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers Ordinance, 2002), the buying of AFQ was broken between MAA (2,944,500 shares) <strong>and</strong> AFQ<br />
(2,900,000 shares). The Amount was recorded in MAA account but actually purchased by AFQ.<br />
The chronology of events is as follows:<br />
o On Nov 10, 2006 MAA transferred 2,000,000 Shares of CTTL from his inves tor account to his Sub-<br />
account m aintained with OIB. Then 2,000,000 shares were transferred to AFQ on Nov 25, 2006.<br />
The same shares were returned by AFQ<br />
to MAA on Nov 27, 2006.<br />
o On Oct 17, 2006 MAA transferred 435,000 shares of CTTL from his CDC Investor Account to the<br />
Sub account of IM maintained with Al-Hoqani <strong>Securities</strong>. It should be noted that IM transferred<br />
2,000,000 CTTL shares from his sub-account maintained with Al-Hoqani <strong>Securities</strong> to the<br />
Investor Account of<br />
MAA on Oct 11, 2006.<br />
o On No<br />
v 22, 2006 M AA sold 1,500,000 shares of CTTL to FNEL <strong>and</strong> other various<br />
clients at the<br />
rate o f Rs.69.15. FNEL was a major buyer in that<br />
C to C transaction <strong>and</strong> quantity bought<br />
amounted to 1,275,000 shares. Please refer to Annex ure 12 for details.<br />
o On No v 27, 2006 MAA Sold 2,000,000 shares of CTTL through explicit cross transaction at KATS<br />
in wh ich AFQ w as the counterparty. o On No v 24, 2006 MAA sold 1,885,000 shares of CTTL to FNEL, Bank of Khyber (BOK) <strong>and</strong> other<br />
variou s clients through C to C transacti ons at the r ate of Rs.76.20. BO K <strong>and</strong> FN EL were major<br />
buyer in that C to C transaction <strong>and</strong> quantity bought by them amo unted to 1, 000,000 shares <strong>and</strong><br />
500,00 0 shares respectively. Please r efer Annexure 13 for details of F NEL C to C.<br />
o OIB o n the instruction of MAA pa id Rs.65m on Dec 5, 2006 to NHB.<br />
Conclusion: Bein g the CEO of CTTL MAA had ma terial inside ifnoramtion r egarding the possible<br />
a cquisition of CTT L shares<br />
by a foreign investor, the audit qualifications <strong>and</strong> the propose d issuance of<br />
cash <strong>and</strong> stock dividend. No disclosure of this trading position was made <strong>and</strong> profits made were not<br />
deposited with the company as required by law. Above mentioned trading by the client is prima facie a<br />
violation of Section 15A of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, titled-“Prohibition on stock<br />
exchange deals by insiders”.<br />
19
Guideline 3 of Listed companies (Prohibition of Insiders Trading Guidelines, titled “Prohibition on<br />
dealing,<br />
communicating or counseling by insiders”.<br />
5.1.1.2<br />
Wash Trades <strong>and</strong> Circular Trades<br />
Wash trade constitute those<br />
improper transactions in which there is no genuine change in actual<br />
ownership of the security. Details of the instances<br />
where MAA was involved in wash trades <strong>and</strong> circular<br />
trades with other member of the Group are given hereunder:<br />
Buy/<br />
Counter<br />
Date Sale Name Volume Counter Party Volume<br />
16-11-06 Buy Muhammad Ajmal Ansari 2,000,000Irfan Mehmood 1,502,000<br />
Mirza Usman Baig 50,000<br />
17-11-06 Buy Muhammad Ajmal Ansari 1,575,200Irfan Mehmood 2,730,000<br />
27-11-06 Sale Muhammad Ajmal Ansari 2,000,000Asim Fayyaz Qureshi 2,000,000<br />
04-12-06 Sale Muhammad Ajmal Ansari 642,600Irfan Mehmood 642,600<br />
05-12-06 Sale Muhammad Ajmal Ansari 4,496,800Naved Haider Bukhari 500,000<br />
First Pakistan Sec. 25,000<br />
06-12-06 Buy Muhammad Ajmal Ansari 3,440,600Irfan Mehmood 3,280,300<br />
Con clusion: It can be observed from above referred wash trades instances that members of the Group<br />
were trading<br />
among themselves. Above referred act whereby false <strong>and</strong> misleading appearance of trading<br />
activity in the scrip was created, is prima facie a violation of S-17 e of <strong>Securities</strong><br />
<strong>and</strong> <strong>Exchange</strong> Ordinance<br />
1969.<br />
5.1.1.3<br />
Price Manipulation<br />
During<br />
the period under review MAA has been involved in active buying <strong>and</strong> selling of CTTL<br />
securities(Refer<br />
5.1.1.1), some times exceeding 69% of the total market turnover of the particular day<br />
(Refer Trading<br />
on Nov 27, 2006, Dec 5, 2006 <strong>and</strong> Dec 6, 2006).<br />
Instances were noted where MAA was seen to be manipulating the market upward<br />
by buying on uptick<br />
<strong>and</strong><br />
selling on downtick on following trading sessions:<br />
Date Buy/Sell Freq Open High Low Close Volume<br />
20061117 Buy 29 59.05 59.85 59.05 59.85 1,575,200<br />
20061201 Buy 36 95.5 97.2 95 97.2 2,078,300<br />
20061205 Sell 66 101.6 101.6 96.9 96.9 4,496,800<br />
Please refer Annexure 10A for graphical presentation of buying/ selling on upticks or downticks for<br />
above referred activity.<br />
20
Conclusion: The trading practices adopted by MAA depicted in the charts above clearly establishes that<br />
MAA<br />
attempted to manipulate the price <strong>and</strong> is therefore in gross violation of S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong> Ordinance 1969.<br />
5.1.1.4 Non-compliance of Listed Companies (Substantial Acquisition<br />
of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
As of December 8, 2006 MAA acting in concert w ith other members of Group acquired more than 80.95%<br />
of paid up capital of the company. Please see para 3.8. All this was done without<br />
the required disclosures<br />
<strong>and</strong> Public announ cement under Sec 4, 5 <strong>and</strong> 6 o f the Ordinance. We believe that the Ansari family<br />
<strong>and</strong><br />
CFO of CTTL were the main architects of this scheme <strong>and</strong> were acting in concert, <strong>and</strong> hence were<br />
in<br />
violation of the<br />
Takeover Ordinance.<br />
However, MAA individually acquired <strong>and</strong> disposed of substantial shareholding in CTT L shares, during<br />
the period under review. Movements in MAA holding (inclusive of CTC Transactions as provided by<br />
Orix Investment Bank) are given below:<br />
Shares bought Shares Sold Cumulative<br />
Quantity in Quantity in Quantity in As % age of<br />
Date<br />
million million million share capital<br />
Opening balance 2.0<br />
Nov 16, 2006 2.0 4.0 6.11<br />
Nov 17, 2006 1.57 5.57 8.52<br />
Nov 22, 2006 CTC 1.5 4.07 6.23<br />
Nov 23, 2006 0.40 4.47 6.84<br />
Nov 24, 2006 CTC 1.88 2.59 3.96<br />
Nov 27, 2006 2.0 0.59 0.9<br />
Nov 28, 2006 CTC 2.94 3.53 5.4<br />
Nov 30, 2006 0.57 4.1 6.27<br />
Dec 1, 2006 2.07 6.17 9.43<br />
Dec 4, 2006 0.64 5.53 8.46<br />
Dec 5, 2006 4.49 1.04 1.59<br />
Dec 6, 2006 3.44 4.4 6.7<br />
Hold ing as at Dec 8,<br />
2006 including<br />
CFS<br />
4. 4 6.7%<br />
Above trading a ctivity of M AA did not attract violation of se ction 4 of the Listed<br />
Companies (Substantial<br />
Acquisition of V oting Shares <strong>and</strong> Takeovers) Ordina nce, 2002, as the same did<br />
not reach 10% threshold<br />
which requires disclosure under the Ordinance.<br />
21
Conclusion: MAA acting in concert with other individual members of the Group violated the Listed<br />
Companies (Substantial Acquisition of voting shares <strong>and</strong> takeovers) Ordinance, 2002<br />
5.1.1.5 Change in beneficial<br />
ownership<br />
Section<br />
222 (c) of the Companies Ordinance 1984 provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of<br />
a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
It has been observed that MAA, CEO of CTTL has entered into various transactions during the period<br />
under review through OIB, <strong>and</strong> from other brokerage houses. Please see MAA cumulative position in<br />
CTTL shares in 5.1.1.4 above. Due to these transactions beneficial ownership of his shareholding in the<br />
CTTL<br />
changed but he has failed to file Form-32 for said changes in shareholding.<br />
Conclusion: MAA as CEO of CTTL was subject to this law, <strong>and</strong> has failed to file the required<br />
information as prescribed in the section 222 of the Companies Ordinance, 1984<br />
5.1.1.6<br />
Pre-open trading session activity<br />
No activity found.<br />
5.1.1.7 Pumping <strong>and</strong> dumping<br />
While reviewing the trading pattern of MAA it has been observed that MAA bought<br />
large quantities of<br />
CTTL shares at lower values <strong>and</strong> subsequently sold them at higher prices. Please refer table given in<br />
5.1.1.1.<br />
MAA also attempted to manipulate the prices as shown i n 5.1.1.3.<br />
Conclusion: Analysis of trading activities<br />
of Mr. Ansari points to the fact that attempts were made to<br />
push up the prices through heavy buying<br />
activity <strong>and</strong> then later when desired/favorable rates were<br />
achieved shares were sold to realize profits.<br />
The above referred trading activity by MAA is prima<br />
facie an offence under S-17 e of <strong>Securities</strong> <strong>and</strong><br />
E xchange Ordinance 196 9.<br />
5.1.1.8 Non-compliance of Short Selling Regulations<br />
No instances were identified.<br />
22
5.1.1.9 Trading by Directors<br />
S-224 of the Companies Ordinance 1984 provides that, where any director, chief executive …. beneficial<br />
owner<br />
of more than ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong><br />
purchase,…. with in a period of less than six months…. he shall make a report <strong>and</strong> tender the amount of<br />
such gain to the company <strong>and</strong> simultaneously send <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission. We noted that no such report was made or gain was tendered by MAA.<br />
Conclusion: Above referred lapse on the part of MAA is a gross violation of S-224 of the Companies<br />
Ordinance, 1984.<br />
General Information:<br />
Details as per CNIC<br />
Name Muhammad Ajmal Ansari<br />
Father Name: Zil-ur-Rahman Ansari<br />
Birth date: Nov 5, 1950<br />
CNIC No. 42000-0677785-3<br />
Address: House No. B-19, 11 Central Street DHA Phase II, Post office, DHA, Karachi<br />
Family No. MV8Q3B<br />
Other information f rom account opening form <strong>and</strong> other records from brokerage house:<br />
UIN No. 42000-0677785-3<br />
OVERALL CONCLUSION:<br />
Based on the observations noted above it is evident that Mr. Muhammad Ajmal Ansari, prima facie<br />
acting in concert<br />
with other members of the Group, was involved in blatant insider trading. MAA was<br />
also prima facie found violating the securities law by manipulating the price of the scrip <strong>and</strong> indulged in<br />
wash sales. By indulging in above referred manipulative <strong>and</strong> prohibitive activities MAA has violated<br />
various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A<br />
• Listed companies (Prohibition<br />
of Insiders Trading Guidelines), Clause 3<br />
•<br />
•<br />
5.1.2<br />
<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (ii), (iii), (v) <strong>and</strong> (vi)<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
23
ASIM FAYYAZ QUERSHI (AFQ) - Group Member<br />
AFQ operated with OIB <strong>and</strong> FNEL.. AFQ opened the account with OIB on November 22, 2006,<br />
introduced by CFO of CTTL <strong>and</strong> started trading only in trading in CTTL shares from November 27, 2006.<br />
At FNEL, AFQ’s account was opened on Nov 11, 2006 on the reference of OIB. Total share position of<br />
AFQ as at December 8, 2006 includes:<br />
Shares in Shares under Shares placed under Repo Total % age of total paid<br />
CDS CFS Arrangement Holding up capital<br />
618,100 5,828,400 0 6,446,500 9.86%<br />
5.1.2.1 Trading Pattern in Ready Market<br />
During the period under<br />
review, trading position of AFQ in Ready Market is as follows:<br />
Open CFS Ready Buy Ready Sale Avg.<br />
CFS<br />
Financee Market<br />
Date Position Volume Volume Price Buy Value Sale Value Qty Volume<br />
27 Nov 2006 - 2,000,000 * - 80.00 160,000,000 - 2,000,000 2,890,300<br />
28 Nov 2006 2,000,000 2,719,600 - 84.00 228,446,400 - 4,098,000 7,204,000<br />
29 Nov 2006 4,098,000 7,294,300 2,944,500** 84.61 617,163,060 - 9,069,400 10,518,600<br />
30 Nov 2006 9,069,400 1,000,000 - 92.60 92,600,000 - 9,494,400 4,568,500<br />
01 Dec 2006 9,494,400 3,000,400 - 97.20 291,638,880 - 12,231,600 15,376,600<br />
04 Dec 2006 12,234,600 - 5,212,000 101.93 - 531,262,523 7,021,600 15,554,200<br />
05 Dec 2006 7,021,600 - 1,450,800 97.97 - 142,134,494 5,562,500 8,769,500<br />
07 Dec 2006 5,787,800 - 1,200 87.50 - 105,000 5,828,400 322,700<br />
Total 16,014,300 9,608,500 1,389,848,340 673,502,017<br />
Buy – Sale = 6,405,800<br />
* MAA was seller<br />
** As per the statement provided by OIB, on Nov 29, 2006 AFQ bought 5,844,500 shares of CTTL<br />
from OIB. In order to avoid the disclosure as required under Listed Companies (Substantial<br />
Acquisition of voting shares <strong>and</strong> takeovers Ordinance, 2002), the buying of AFQ was broken<br />
between Muhammad Ajmal Ansari (2,944,500 shares) <strong>and</strong> Asim Fayyaz Qureshi (2,900,000<br />
shares).<br />
Chronology of events are as follows:<br />
o MAA transferred 2,000,000 Shares of CTTL from his Sub-account maintained with OIB to AFQ on<br />
Nov 25, 2006. The same shares were returned by<br />
AFQ to MAA on Nov 27, 2006.<br />
24
o On Nov 27, 2006 AFQ bought 2,000,000 shares of CTTL through<br />
explicit cross transaction at KATS in<br />
o<br />
o<br />
which MAA was the counter party.<br />
On Dec 4, 2006 FNEL received a cheque issued by IM to be credited in the account of AFQ against a<br />
debit balance of Rs.80m. The cheque was subsequently dishonoured.<br />
On the instructions of AFQ, OIB paid Rs. 85 m to NHB on Dec 5, 2006.<br />
o Rs. 50 million was paid through cheque on Dec 6, 2006<br />
by Al-Hoqani <strong>Securities</strong> on behalf of his client<br />
o<br />
IM to OIB for its client AFQ .<br />
It was also noticed that during the period under review that AFQ, while trading with FNEL, did not<br />
pay a single rupee whereas his debit balance touched Rs.52m at one point in time. Similarly<br />
in case of<br />
AFQ’s trading through OIB, at only two instances receipt <strong>and</strong> payment instruments were exchanged.<br />
OIB issued a cheque for Rs.85m t o NHB, apparently on AFQ’s instructions, on Dec 5, 2006. In another<br />
instance, OIB receive d a cheque for R s.50m from Al-Hoqani Securiti es (on IM’s ) for the credit of<br />
AFQ accou nt on Dec 6,<br />
2006.<br />
Conclusion: Above referred trading pattern as well as instances where<br />
payments <strong>and</strong> deliveries were<br />
exchanged among the identifi ed perso ns, clearly shows that AF Q was an active member of th e Group.<br />
5.1.2.2 Wash Trades <strong>and</strong> Circular Trades [see comment<br />
s on MAA’s wash trades]<br />
Wash trade constitute<br />
those improper transactions in which there is no genuine change in actual<br />
ownership of the security. Details of instances where AFQ was involved in wash trades <strong>and</strong> circular<br />
trades with other member of the Group are given hereunder:<br />
Buy/<br />
Counter<br />
Date Sale Name Volume Counter Party Volume<br />
27-11-06 Buy Asim Fayyaz Qureshi 2,000,000Muhammad Ajmal Ansari 2,000,000<br />
29-11-06 Buy Asim Fayyaz Qureshi 7,294,300Muhammad Hisar Ansari 250,000<br />
First Pakistan Sec. 25,000<br />
30-11-06 Buy Asim Fayyaz Qureshi 1,000,000Naved Haider Bukhari 1,000,000<br />
01-12-06 Buy Asim Fayyaz Qureshi 3,000,400Muhammad Hisar Ansari 1,276,300<br />
04-12-06 Sale Asim Fayyaz Qureshi 5,212,000Naved Haider Bukhari 5,212,000<br />
Conclusion:<br />
It can be observed from above referred wash trades instances that members of the Group<br />
were trading among themselves. Above referred act whereby false <strong>and</strong> misleading appearance of<br />
25
trading activity in the scrip was created, is tantamount to an offence under S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong><br />
Ordinance 1969.<br />
5.1.2.3 Price Manipulation [See comments on MAA’s price manipulation]<br />
During the period under review AFQ has been involved in active buying<br />
<strong>and</strong> selling of CTTL shares<br />
(5.1. 2.1), some times exceeding 69% of the market turnover of the particular day (Refer Trading on Nov<br />
27, 29, <strong>and</strong> Dec 4, 2006).<br />
Additionally instances have been noted where various attempts were made by AFQ to influence the<br />
price during the trading sessions.<br />
Date Buy Freq Open High Low Close Volume<br />
20061129 Buy 58 80.05 88.2 80.05 88.2 7,294,300<br />
Please<br />
refer Annexure 10B for graphical presentation of buying/ selling on upticks or downticks for<br />
above<br />
referred activity.<br />
Conclusion:<br />
The trading practices adopted by AFQ depicted in the charts above clearly establishes that<br />
AFQ attempted to manipulate the prices <strong>and</strong> is therefore in gross violation of S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong><br />
Ordinance 1969.<br />
5.1.2.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
We noted various instances during the period under review when AFQ’s interest in the CTTL shares<br />
exceeded 10%, without due disclosure, as required by the Listed Companies (Substantial<br />
Acquisition of<br />
voting shares <strong>and</strong> takeovers) Ordinance, 2002. For instance please refer table given in 5.1.2.1. Trading<br />
activity on Nov 29, 2006, Nov 30, 2006, Dec 1, 2006, <strong>and</strong> Dec 4, 2006 caused AFQ’s stake in CTTL amount<br />
to 13.84%, 14.52%, 18.71% <strong>and</strong> 10.74% respectively.<br />
Conclus ion:<br />
AFQ was in violation of the<br />
Takeover<br />
Ordinance.<br />
5.1.2. 5 Change<br />
in beneficial<br />
ownership<br />
Section 22 2 (c) o f the Companies Ordinanc e 1984 provides that every director, chief executive,<br />
company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
26
It has been observed that AFQ has entered into various buy <strong>and</strong> sell transactions substantially changing<br />
beneficial interest during the period under review, consequently required submission of required<br />
information to the Commission through Form-32.<br />
Conclusion: AFQ, as beneficial owner of more than 10% shareholding, failed to submit the required<br />
information as prescribed in the section 222 of the Companies Ordinance, 1984<br />
5.1.2.6 Pre-open trading session activity<br />
While reviewing pre-ope n session bids an d offers data, w e observed instances where AFQ manipulated<br />
the CTTL shares price by plac ing bulk quanti ty orde rs at upper level/lower level price lock, as<br />
applicable.<br />
A summary of Pre-open session analysis of bids/offers placed by AFQ is given below:<br />
Total<br />
Orders<br />
Qty<br />
Total<br />
Market<br />
Turnover<br />
Order<br />
entered as<br />
% to Total<br />
Market<br />
Member Buy/ Order No. of<br />
Queued<br />
Date Open Close code Sale Qty Lot orders<br />
Price<br />
29-Nov-06 84 88.2 77 Buy 200,000 10 2,000,000 79.8 10,518,600 19%<br />
30-Nov-06 88.2 92.6 175 Buy 200,000 5 1,000,000 92.6 4,568,500 22%<br />
1-Dec-06 92..60 97.2 175 Buy 200,000 8 1,600,000 97.2 15,376,600 10%<br />
Conclusion: Above instances tantamount to market manipulation <strong>and</strong> therefore is an offence under S-<br />
17(e) of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.2.7 Pumping <strong>and</strong> dumping<br />
While reviewing the trading pattern of AFQ it has been observed that AFQ bought large quantities of<br />
CTTL shares at lower values then pumped up the price<br />
by buying at upticks <strong>and</strong> subsequently sold the<br />
shares<br />
at higher prices. Please refer table given in 5.1.2.1 which shows that bulk quantity of shares were<br />
bought on Nov 27 to Dec 1, 2006 at relatively lower prices whereas<br />
selling at higher prices was started<br />
from<br />
the period Dec 4 <strong>and</strong> onwards.<br />
Conclusion: The above mentioned analysis of trading activities of AFQ leads to a conclusion that in the<br />
first instance prices were hiked up through buying activity <strong>and</strong> then large quantities of stock were<br />
dumped when desired/favorable rates were attained. Substantial gains have been realized through such<br />
pumping <strong>and</strong> dumping trade practices.<br />
27
The above referred trading activities by AFQ tantamount to an offence under of S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong> Ordinance 1969.<br />
5.1.2.9 Non-compliance of Short Selling Regulations<br />
Conclusion: No instance of non compliance found.<br />
5.1.2.10 Trading by Directors <strong>and</strong> major shareholder<br />
S-224 of the Companies Ordinance 1984 provides that, where any director, chief executive …. beneficial<br />
owner of more than ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong><br />
purchase,…. with in a period of less than six months…. shall make a report <strong>and</strong> tender the amount of<br />
such gain to the company <strong>and</strong> simultaneously send <strong>and</strong> intimation to this effect to the registrar <strong>and</strong><br />
the<br />
Commission. We noted<br />
that no such report was made or gain was tendered by AFQ.<br />
Conclusion: Above referred lapse on the part of AFQ is a gross violation of S-224 of the Companies<br />
Ordinance,<br />
1984.<br />
General Informati on:<br />
D etails as per CNIC:<br />
Name Asim Fayyaz Qureshi<br />
Father Name Fayyaz-uddin Qureshi<br />
Date of Birth Dec 12, 1970<br />
CNIC<br />
No. 42201-5948071-5<br />
Address<br />
House G-54/2 Clifton Quarters, Clifton, Jehangir Road 2, Karachi, Post office New Town,<br />
Karachi East<br />
Family No J79Y4P<br />
Other Information:<br />
UIN No: 42201-5948071-5<br />
OVERALL CONCLUSION<br />
Based<br />
on the observations noted above it is evident that AFQ acting in concert with other members of<br />
the Group, was involved in blatant insider trading. AFQ was also found violating the securities law by<br />
manipulating the price of the scrip <strong>and</strong> indulged in wash sales. By indulging in above referred<br />
manipulative <strong>and</strong> prohibitive activities AFQ has violated various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969,<br />
Section 15A<br />
•<br />
Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
28
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (ii), (iii), (iv), (v) <strong>and</strong> (vi)<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ordinance, 2002-Section-4<br />
•<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
29
5.1.3 NAVEED HAIDER BUKHARI (NHB) - Group Member:<br />
NHB was operating through three members, Shahid Ali Habib <strong>Securities</strong>, Noman Abid & Company <strong>and</strong><br />
FCEL.<br />
NHB’s account with Noman Abid & Company was opened on December 01, 2006 while trading<br />
commenced only on December 04, 2006. NHB traded only in the shares of CTTL with Shahid Ali Habib<br />
<strong>Securities</strong>, Noman Abid & Company <strong>and</strong> FNEL during the period under review. NHB opened his<br />
account with FCEL on September 03, 2004. The account opening form for NHB with Shahid Ali Habib<br />
<strong>Securities</strong> under client code 0415 was not dated <strong>and</strong> contained annotations from the trader about<br />
commission rates being same as Junaid Habib (Client of Shahid Ali Habib <strong>Securities</strong>-Code 0414). This<br />
indicated the possibility of any link between two. The total shares position of NHB as at Dec 8, 2006:<br />
Shares in Shares Shares placed under<br />
% age of total paid<br />
CDS under CFS Repo Arrangement Total Holding up capital<br />
0 6,331,100 0 6,331,600 9.69%<br />
5.1.3.1 Trading pattern in Ready Market<br />
During the period under review, trading position of NHB in Ready Market is as follows:<br />
Open Buy Sale Avg.<br />
Financee Market<br />
Date CFS Position Volume Volume Price Buy Value Sale Value Qty Volume<br />
28-Nov-2006 - - 2,000,000 84.00 - 168,000,000 - 7,204,000<br />
30 Nov 2006 - - 1,000,000 92.60 - 92,600,000 - 4,568,500<br />
01 Dec 2006 - 574,500 - 97.20 55,841,400 - 574,500 15,376,600<br />
04 Dec 2006 574,500 7,000,000 - 101.96 713,712,656 - 7,574,500 15,554,200<br />
05 Dec 2006 7,574,500 500,000 - 96.90 48,450,000 - 8,074,500* 8,769,500<br />
08 Dec 2006 6,574,500 - 1,100 83.15 - 91,465 6,331,600 75,600<br />
Total 8,074,000 3,001,100 818,004,056 260,691,465<br />
Buy – Sale = 5,072,900<br />
* On Dec 7, 2006 1,500,000 shares were released.<br />
Chronology of events are as follows:<br />
o NHB received 200,000 shares, 700,000 shares <strong>and</strong> 1,300,000 shares from IM (through IM’s sub-<br />
account maintained at Al-Hoqani <strong>Securities</strong> Ltd) on June 14, 2006, Nov 29, 2006 <strong>and</strong> Nov 30, 2006.<br />
o NHB paid Al-Hoqani <strong>Securities</strong> for credit of its client IM a sum of Rs. 25 million on December 04,<br />
2006. The cheque was dishonoured.<br />
o NHB received Rs. 65 million from MAA on December 05, 2006 (client of OIB)<br />
30
o NHB received Rs. 85 million from AFQ on December 05, 2006 (client of OIB) presumably to pay for<br />
NHB’s<br />
acquisition of 7.5m CTTL shares.<br />
o NHB paid cheque dated Dec 6, 2006 amounting Rs.80m to Shahid Ali Habib <strong>Securities</strong> Ltd. against<br />
his purchase of 7,574,500 shares of CTTL, vide Cheque number 485251 drawn on MCB Bank.,<br />
however the cheque was dishonoured.<br />
o On Dec 7, 2006 Noman Abid <strong>Securities</strong> received a cheque amounting Rs.5m for credit to AFQ’s<br />
account. Issuer of the cheque was IM.<br />
Conclusion: NHB was an active member of the Group, identified earlier in this report, working with<br />
Ansari family <strong>and</strong> CFO of CTTL <strong>and</strong> therefore indirectly indulged in insider trading in CTTL shares.<br />
5.1.3.2 Wash Trades <strong>and</strong> Circular Trade s<br />
Wash<br />
trade constitute those improper transactions in which there is no genuine change in actual<br />
ownership of the security. Details of the instances<br />
where NHB was involved in wash trades <strong>and</strong> circular<br />
trades with other members of the Group are given hereunder:<br />
Buy/<br />
Counter<br />
Date Sale<br />
Name Volum e Counter Party Volume<br />
30-11-06 Sale Naved Haider Bukhari 1,000,000Asim Fayyaz Qureshi 1, 000,000<br />
01-12-06 Buy Naved Haider Bukhari 574,000First Pakistan <strong>Securities</strong> 25,000<br />
04-12-06 Buy Naved Haider Bukhari 7,000,000Asim Fayyaz Qureshi 5,212,000<br />
Naved Haider Bukhari First Pakistan Sec. 1,788,000<br />
05-12-06 Buy Naved Haider Bukhari 500,000Ajmal Ansari 500,000<br />
Conclusion: It can be observed from above referred wash trades instances that NHB as a member of the<br />
Group indulged in wash sales, <strong>and</strong> creating false<br />
<strong>and</strong> misleading appearance of trading activity in the<br />
scrip, which is an offence under S-17 (e)(iii) of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1. 3.3 Price Manipulation<br />
During the period under review NHB has been involved in active buying <strong>and</strong> selling of CTTL shares<br />
(5.1.3.1),<br />
some times exceeding 45% of the market turnover of the particular day (Refer Trading on Dec 4,<br />
2006).<br />
Additionally<br />
an instance has been noted where an attempts was made by NHB to influence to price<br />
during the trading sessions by buying on uptick.<br />
31
Date Buy Freq Open High Low Close Volume<br />
2 0061204 Buy 70 99.55 102.05 99.55 102.05 7,000,000<br />
Please refer Annexure 10C for graphical presentation of buying/ selling on uptick for above referred<br />
activity.<br />
Conclusion: Trading practices adopted by NHB<br />
depicted in the chart above clearly establishes that NHB<br />
attempted to manipulate the prices which is an offence under S-17(e)(v) of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong><br />
Ordinance 1969.<br />
5.1.3.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
We noted various instances during the period under<br />
review when NHB’s interest in CTTL shares<br />
exceeded 10% limit without due disclosure as required under the Listed Companies (Substantial<br />
Acquisition of voting shares <strong>and</strong> takeovers) Ordinance, 2002. For instance please refer table in 5.1.3.1 <strong>and</strong><br />
corresponding trading days Dec 4, 5 <strong>and</strong> Dec 8, 2006 when NHB stake in CTTL amounted to 11.59%,<br />
11.59% <strong>and</strong> 12.17%. respectively.<br />
Conclusio n: NHB was in violation of Listed Companies (Substantial Acquisition<br />
of voting shares <strong>and</strong><br />
t akeovers) Ordinance, 2002.<br />
5.1.3.5 Cha nge in beneficial ownership<br />
Section<br />
222 (c) of the Companies Ordinance 1984 provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
It has been observed that NHB<br />
has entered into various transactions in CTTL share during the period<br />
under review, consequently obtaining interest in the scrip in excess of 10% which require submission of<br />
required information to the Commission through Form-32 However he failed to submit the required<br />
information as prescribed in the section 222 of the Companies Ordinance, 1984<br />
Conclusion: NHB has not filed the required information as prescribed in the aforesaid section.<br />
32
5.1.3. 6 Pre-open trading session activity While<br />
reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where AFQ manipulated<br />
the CTTL shares price by placing bulk quantity orders at upper level/lower level price lock, as<br />
applicable.<br />
A summary of Pre-open session analysis of bids/offers placed by NHB is given below:<br />
Total<br />
Order<br />
entered as<br />
Member Buy/ Order No. of Total Queued Market % to Total<br />
Date Open Close code Sale Qty Lot orders Orders Qty Price Turnover Market<br />
4-Dec 97.2 101.95 105 Buy 200,000 16 3,200,000 102.5 15,554,000 21%<br />
8-Dec 87.5 83.15 105 Sell 250,000 10 22,500,000 83.15 75,600 29762%<br />
Conclusion: Above referred instances tantamount to market manipulation <strong>and</strong> therefore is an offence<br />
under S-17(e) of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.3.7 Pumping <strong>and</strong> dumping<br />
No instances found.<br />
5.1.3.8 Non-compliance of Short Selling Regulations<br />
No instances found.<br />
5.1.3.9<br />
Trading by Directors <strong>and</strong> major shareholder<br />
S-224 of the Companies Ordinance 1984 provides<br />
that, where any director, chief executive …. beneficial<br />
owner of more than ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong><br />
purchase,…. with in a period of less than six months…. shall make a report <strong>and</strong> tender the amount of<br />
such gain to the company <strong>and</strong> simultaneously send <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission. We noted that no such report was made or gain was tendered by NHB.<br />
Conclusion:<br />
Above referred lapse on the part of NHB is a gross violation of S-224 of the Companies<br />
Ordinance, 1984.<br />
General Information:<br />
D etails as per the CNIC:<br />
Name Naveed Haider Bukhari<br />
Father Name Abbas Haider Bukhari<br />
Date<br />
of Birth August 14, 1971<br />
CNIC No. 42101-7070400-9<br />
33
Family No. N8J77X<br />
Address 2-A 4/7 Nazimabad 2, Karachi<br />
OVERALL CONCLUSION<br />
Based on the<br />
observations noted above it is evident that NHB acting in concert with other members of<br />
the group, was involved in blatant insider trading. NHB was also found violating the securities law by<br />
manipulating the price of the scrip<br />
<strong>and</strong> indulged<br />
in wash sales.<br />
By indu<br />
lging in above referred<br />
manipulat ive <strong>and</strong> prohibitive<br />
activiti<br />
es NHB<br />
has violated<br />
various<br />
law <strong>and</strong> regulations<br />
such<br />
as:<br />
• Securiti es <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 1 5A<br />
•<br />
Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (ii),(iii),(v) <strong>and</strong> (vi)<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ordinance, 2002-Section-4<br />
•<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
34
5.1.4 MUHAMMAD ASHRAF KHAN (MAK) - Group Member:<br />
MAK has been operating with OIB <strong>and</strong> FNEL. He opened his account with OIB on October 03, 2006, on<br />
the<br />
recommendation of the CFO of CTTL, while the trading started on November 07, 2006. While<br />
analyzing the account opening form<br />
with OIB it was revealed that MAK has nominated Imran Mehmood<br />
as nominee, who is serving as CFO of CTTL. MAK opened his account with FNEL on October 17, 2006<br />
while the trading started only on November 13, 2006.<br />
The total shares position of MAK as at Dec 8, 2006 shows:<br />
Shares in Shares Shares placed under Total Holding % age of total paid<br />
CDS under CFS Repo Arrangement<br />
up capital<br />
2 ,366,800 3,524,900 3,845,000 9,736,700<br />
14.88%<br />
5.1. 4.1 Trading pattern in Ready Market<br />
During the period under review, the trading position of MAK in Ready market was as follows:<br />
Date<br />
Open CFS<br />
Position<br />
Buy<br />
Volume<br />
Sale<br />
Volume<br />
Avg.<br />
Price Buy Value<br />
Sale<br />
Value<br />
Financee Market<br />
Qty Volume<br />
07 Nov 2006 - 830,700 - 54.78 45,453,337 - 829,700 6,640,900<br />
08 Nov 2006 829,700 532,300 1000 54.99 29,268,639 54,990 1,362,000 2,826,900<br />
13 Nov 2006 612,000 1,440,700 - 53.69 77,347,521 - 2,057,700 2,838,500<br />
07 Dec 2006 3,599,900 - 600 87.50 - 52,500 3,524,900 322,700<br />
Total 2,803,700 1,600 152,069,497 106,990<br />
Buy – Sale = 2,802,100<br />
While reviewing records received from OIB it was noted that MAK was involved in trading of CTTL<br />
shares earlier than the period under review, i.e. before November 7, 2006. With his OIB trading account,<br />
MAK bought 2,251,300 shares of CTTL during the period Oct 4, 2006 to Oct 10, 2006. Thereafter, FNEL<br />
made an arrangement with MAK whereby, financing against 2,000,000 CTTL shares at Rs.50/- was<br />
provided to MAK. Details are given hereunder:<br />
o On October 10, 2006 out of 2m shares, 942,000 shares were transferred to FNEL. On Oct 16,<br />
2006 OIB received Rs.47,145,000 against above shares from FNEL.<br />
o On October 18, 2006 out of 2m shares, 1,057,100 shares were transferred to FNEL. On Nov<br />
13, 2006 OIB received Rs. 52,855,000 against above shares.<br />
Conclusion: Above mentioned trading by MAK on behalf of Mr. Imran Mehmood, CFO of CTTL, is a<br />
violation of Section 15A of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, titled-“Prohibition on stock<br />
exchange deals by insiders”. Being CFO of the company, Imran Mehmood was insider to the material<br />
35
information relating to possible acquisition by Saudi Group as well as the audit qualifications, <strong>and</strong> the<br />
attempted bonus issue <strong>and</strong> cash dividends.<br />
“Above mentioned trading activity is also the violation of Guideline 3 of Listed companies (Prohibition<br />
of Insiders Trading Guidelines, titled “Prohibition on dealing, communicating or counseling by<br />
insiders”.<br />
5.1.4.2 Wash Trades <strong>and</strong> Circular Trades<br />
Wash trade constitute those<br />
improper transactions in which there is no<br />
genuine change in actual<br />
ownership o f the security. Details<br />
of the instances where<br />
MAK was involved<br />
in wash trades <strong>and</strong> circular<br />
trades<br />
with other member of the Group are given hereunder which was designed to active trading in the<br />
scrip:<br />
Buy/ Counter<br />
Date Sale Name Volume Counter Party Volume<br />
07-11-06 Buy M. Ashraf Khan 830,700Irfan Mehmood 830,700<br />
08-11-06 Buy M. Ashraf Khan 532,300M. Ashraf Khan 1,000<br />
13-11-06 Buy M. Ashraf Khan 1,440, 700Irfan<br />
Mehmood 800,000<br />
Conclusion: It can be observed from above referred wash tra des instances that MAK as<br />
an active<br />
member of the Group was trading with other Group members. Above referred act whereby false <strong>and</strong><br />
misleading appearance<br />
of trading activity in the scrip was created, is a violation of S-17 e of <strong>Securities</strong><br />
<strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.4.3 Price Manipulation<br />
During the period we noted an instance where attempt was made by MAK to influence the price during<br />
the trading session. Following are details:<br />
Date Buy Frequency Open High<br />
Low Close Volume<br />
20061107 Buy 20 54 54.9 54 54.9 829,700<br />
Please refe r Annexure 10D for graphical presentation of buying/ selling on upticks or downticks for<br />
above referred activity.<br />
Conclusion: The trading practices adopted by MAK depicted in the chart above clearly establishes the<br />
fact<br />
that the MAK attempted to manipulate price of CTTL share which is an offence under S-17e of<br />
<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
36
5.1.4.4 Non-compliance of Listed Companies<br />
(Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
On December 8, 2006, MAK’s interest (i.e. 14.88%) in the CTTL shares exceeded 10%, without due<br />
disclosure, as required in the Listed Companies (Substantial Acquisition of voting shares <strong>and</strong> takeovers)<br />
Ordinance, 2002.<br />
Conclusion:<br />
MAK was therefore in violation of the Ordinance.<br />
5.1.4.5 Change in beneficial ownership<br />
Section 222 (c) of the Companies Ordinance 1984 provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company<br />
shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
I t has been observed that MAK has entered into a transaction during the period<br />
under review, thus<br />
exceeding the threshold that re quire submission of information to the Commission through Form-32<br />
However he failed to submit the required information as prescribed in the section 222 of the Companies<br />
Ordinance, 1984<br />
Conclusion: MAK as holder of 14.88% shareholding, has not filed the required information as prescribed<br />
in the aforesaid section <strong>and</strong> hence<br />
is in violation of the law.<br />
5.1.4.6 Pre-open trading session activity<br />
While reviewing pre-open session bids <strong>and</strong> offers data, we observed an instance where MAK<br />
manipulated the CTTL shares price by placing bulk quantity orders<br />
at lower level price lock. A summary<br />
of Pre-ope n sessio n analysis is given below: Total Total<br />
Order<br />
entered as<br />
Member Buy/ Order No. of Orders Queued Market % to Total<br />
Date Open Close code Sale Qty Lot orders Qty Price Turnover Market<br />
7-Dec 92.1 87.5 175 Sale 250,000 6 1,500,000 87.5 322,700 465%<br />
Conclusion: Above instances tantamount to market manipulation <strong>and</strong> therefore is an offence under S-<br />
17e<br />
of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
37
5.1.4.7 Pumping <strong>and</strong> dumping<br />
No instances of violation were found.<br />
5.1.4.8 Trading by Directors <strong>and</strong> major shareholder<br />
S-224 of the Companies<br />
Ordinance 1984 provides that, where any director, chief executive …. beneficial<br />
owner<br />
of more than ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong><br />
purchase,…. with in a period of less than six months…. shall make a report <strong>and</strong> tender the amount of<br />
such<br />
gain to the company <strong>and</strong> simultaneously send <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission. We noted that no such report was made or gain was tendered by MAK.<br />
Conclusion: Above referred lapse on the part of MAK is a gross violation of S-224 of the Companies<br />
Ordinance, 1984.<br />
General Information:<br />
D etails as per the CNIC:<br />
Name<br />
Muhammad Ashraf Khan<br />
Father Name Muhammad Anwar Khan<br />
Date of Birth March 19, 1970<br />
CNIC No. 42201-9092086-7<br />
Family No. J5476M<br />
Address House<br />
No. 710/43, Jamshed Road, Fatima Jinnah Colony, Karachi<br />
Details as per the Account opening form:<br />
Nominee details as per the Account opening form of OIB (CNIC is also available with the A/c Opening<br />
form):<br />
Nominee Name Imran Mehmood<br />
Father Name Syed Mehmood Ul Hasan<br />
Date of Birth Oct 4, 1973<br />
CNIC 42000-04200195-3<br />
Family No O7G0N5<br />
Address A-1, ST -19A, Block 16, Gulistan-e-Johar, Karachi<br />
OVERALL CONCLUSION<br />
Based on the observations noted above it is evident that Mr. Muhammad<br />
Ashraf Kha<br />
n, acting in concert<br />
with other members of the group, was involved in blatant insider<br />
trading.<br />
MAK<br />
was also<br />
found<br />
violating the securities law by manipulating the price of the scrip <strong>and</strong> indulged in wash sales. By<br />
indulging in above referred manipulative <strong>and</strong> prohibitive activities MAK has violated various law <strong>and</strong><br />
regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A<br />
•<br />
Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
38
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (iii),(v) <strong>and</strong> (vi)<br />
• Listed Companies (Substantial Acquisitions<br />
of voting shares <strong>and</strong> takeovers) Ordinance, 2002-Section-4<br />
•<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
39
5.1.5 IRFAN MEHMOOD (IM) - Group Member:<br />
IM, client of Al-Hoqani <strong>Securities</strong> opened his account with the member in November 2006. While<br />
examining the account opening forms, it was found that<br />
Irfan Mehmood is the brother of Imran<br />
Mehmood (CFO Callmate Telips). IM traded only in the shares of CTTL.<br />
The total shares position of IM in his own name <strong>and</strong> in name of FPS as at Dec 8, 2006 includes:<br />
Shares in Shares Shares placed under<br />
% age of total paid<br />
Client CDS under CFS Repo Arrangement Total Holding up capital<br />
IM 3,100,932 1,500,000 9,331,801 13,932,733 21.31%<br />
FPS 0 4,818,500 450,000 5,268,500 8.06%<br />
Total 3,100,932 6,318,500 9,781,801 19,201,233 29.37%<br />
Please note that 13.40 million shares were transferred to IM by Ansari Family.<br />
Above holding represents the shares which were transferred by the Ansari family <strong>and</strong> Group to IM CDC<br />
A/c’s. FPSL which is the member of Lahore stock <strong>Exchange</strong>, operates through OIB <strong>and</strong> FNEL. FPSL<br />
informed that it was trading solely on behalf of its client, IM. It should be noted that FPSL is a related<br />
party of FNEL.<br />
5.1.5.1 Trading pattern in Ready Market<br />
During the period under review, the trading position of IM in the ready market was as follows (IM’s<br />
position through FPSL is not included below):<br />
Open<br />
CFS Buy Sale Buy/ Sale<br />
Financee Market<br />
Date Position Volume Volume Avg. Price Buy Value Sale Value Qty. Volume<br />
07 Nov 2006 - - 870,500 53.38 - 46,467,155 - 6,640,900<br />
08 Nov 2006<br />
-<br />
185,000 185,000<br />
54.85/<br />
54.03<br />
10,147,527 9,996,113 - 2,826,900<br />
13 Nov 2006 - - 800,000 52.86 - 42,313,808 - 2,838,500<br />
14 Nov 2006<br />
-<br />
854,100 77,000<br />
54.96/<br />
54.34<br />
46,942,496 4,184,419 - 2,450,900<br />
15 Nov 2006<br />
-<br />
75,000 145,000<br />
54.97/<br />
56.04<br />
4,122,955 8,126,070 - 2,624,600<br />
16 Nov 2006 - - 1,502,000 56.62 - 85,039,268 - 6,022,600<br />
17 Nov 2006<br />
-<br />
400 2,730,000<br />
58.00/<br />
57.99<br />
23,200 158,324,833 - 12,585,300<br />
20 Nov 2006 - 1,200 - 62.80 75,360 - - 690,900<br />
21 Nov 2006 - 224,100 - 65.90 14,768,190 - - 586,100<br />
22 Nov 2006 - 282,200 - 69.15 19,514,130 - - 1,614,700<br />
23 Nov 2006 - 191,800 - 72.60 13,924,680 - - 1,996,800<br />
24 Nov 2006 - 785,100 - 76.20 59,824,620 - - 1,839,500<br />
27 Nov 2006 - 1,000 - 80.00 80,000 - - 2,890,300<br />
40
28 Nov 2006 - 800,800 - 84.00 67,267,200 - - 7,204,000<br />
29 Nov 2006 - 500,000 - 81.41 40,704,255 - - 10,518,600<br />
30 Nov 2006 - 224,800 - 92.60 20,816,480 - - 4,568,500<br />
01 Dec 2006 - 3,489,200 - 94.79 330,756,096 - - 15,376,600<br />
04 Dec 2006 - 2,600,000 - 101.88 264,886,081 - 1,500,000 15,554,200<br />
05 Dec 2006 1,500,000 - 1,000,000 96.90 - 96,903,030 1,500,000 8,769,500<br />
06 Dec 2006 1,500,000 107,300 3,280,300<br />
92.43/<br />
9,917,203 305,034,351 1,500,000 5,823,400<br />
92.99<br />
Total 10,322,000 10,589,800 903,770,473 756,389,047<br />
Buy – Sale = (267,800)<br />
Given below is the table containing trading of IM done throug h his own ID as well as by<br />
using<br />
proprietary account<br />
of FPSL:<br />
Open CFS Buy Sale Cumulative Financee Market<br />
Date Position Volume Volume Balance Buy Value Sale Value Qty Volume<br />
7-Nov-06 - 0 870,500 (870,500) - 46,467,155 - 6,640,900<br />
8-Nov-06 - 185,000 185,000 (870,500) 10,147,527 9,996,113 - 2,826,900<br />
13-Nov-06 - 0 800,000 (1,670,500) - 42,313,808 - 2,838,500<br />
14-Nov-06 - 854,100 77,000 (893,400) 46,942,496 4,184,419 - 2,450,900<br />
15-Nov-06 - 75,000 145,000 (963,400) 4,122,955 8,126,070 - 2,624,600<br />
16-Nov-06 - 0 1,502,000 (2,465,400) - 85,039,268 - 6,022,600<br />
17-Nov-06 - 5,345,900 2,730,000 150,500 318,824,646 158,324,833 - 12,585,300<br />
20-Nov-06 5,395,500 1,800 0 152,300 75,360 - - 690,900<br />
21-Nov-06 5,396,100 224,800 0 377,100 14,768,190 - 5,396,800 586,100<br />
22-Nov-06 5,396,800 371,600 0 748,700 25,696,140 - 5,396,200 1,614,700<br />
23-Nov-06 5,486, 200 191, 800 0 940,500 13,924,680 - 5,486,200 1, 996,800<br />
24-Nov-06 5,48 6,200 899,400 0 1,839,900 68,534,280 - 5,456,600 1,839,500<br />
27-Nov-06 5,456,600 1,000 0 1,840,900 80 ,000 - 5,456,500 2,890,300<br />
28-Nov-06 5,456,500 2,800,800 1, 200,000 3,441,700 235,267, 200 100,800,000 6,226,500 7,204,000<br />
29-Nov-06 6,226,500 500,000 0 3,941,700 40,704,255 - 6,226,500 10,518,600<br />
30-Nov-06 6,226,500 1,847,300 575,000 5,214,000 171,059,980 53,245,000 7,224,000 4,568,500<br />
1-Dec-06 7,224,000 4,654,700 0 9,868,70 0 444,042, 696 - 8,389,500 15,376,600<br />
4-Dec-06 8,389,500 2,600,000 2,800,000 9,668,700 264,886,081 285,740,000 6,893,500 15,554,200<br />
5-Dec-06 6,893,500 0 1, 600,000 8,068,700 - 155,213,030 6,093,500 8,769,500<br />
6-Dec-06 6,093,500 107,300 3,280,300 4,895,700 9,917,203 - 6,318,500 5,823,400<br />
7-Dec-06 4,818,500 0 0 4,895,700 - - 6,318,500 322,700<br />
8-Dec-06 4,81 8,500 0 0 4,895,700 - - 6,31 8,500 75,600<br />
Total 20,676,700 15,781,0 00 1,669,073,239 949,449,69 6<br />
41
o During investigation we were inf ormed by Al-Hoqani <strong>Securities</strong> that it s c lient IM, during<br />
the<br />
period December 7, 2005 to December 7, 2006 received 30.8 million shares of CTTL in his<br />
sub<br />
account, fro m various accou nts, including following: Incoming deliveries Date<br />
Quantity<br />
Muhammad Siddiq Suleman Dec 7, 2005 to May 17, 2006 3,754,718<br />
Yuba Jamil CDC Inv A/c Oct 10, 2006 1,900, 000<br />
Mohd. Ajmal Ansari Oct 17, 2006 435,000<br />
Ahmed Jamil Ansari CDC Inv A/c Nov 8, 2006 11,500,000<br />
Irfan Mehmood CDC Inv A/c Dec 31, 2005 to June 12, 2006 10,652,685<br />
First Dawood Inv Bank Jan 26, 2006 936,175<br />
Shahid Ali Habib Sec June 12, 2006 300,0 00<br />
Following are some instanc es of the outgoing delive ries of CTTL f rom Imran Mehmood’ s A/c:<br />
Outgoing deliveries Date Quantity Sold in the market<br />
Various dates<br />
Jan 1, 2006 to Jun 30 , 2006:<br />
4,887,500<br />
July 1, 2006 to Dec 8, 2006:8,977,350<br />
13, 864,850<br />
Shahid Ali Habib SEC June 12, 2006 to Dec 5, 2006 1,600,000 Mohd. Ajmal Ansari June 13, 2006 to Nov 10, 2006 2,275,000 First Pakistan <strong>Securities</strong> Nov 16, 2006 2,000,000 Irfan Mehmood Dec 7, 2006 350,000<br />
First Dawood<br />
Inv Bank June 13, 2006 1,225,000 Trust Leasing Nov 28, 2006 1,640,420<br />
Naveed Bukh ari (FCSC) Nov 29 & Nov 30, 2006 2,000,000<br />
Anwar Sheikh Dec 31, 2005 to June 14, 2006<br />
320,000<br />
o IM t ransferred 0.7 million CT TL shares on November<br />
29, 2006 to NHB <strong>and</strong> 1.3 million shares<br />
again on November 30, 2006 through CDS.<br />
o NHB made a p ayment of Rs. 25m to Al-Hoqani <strong>Securities</strong> on IM’s behalf. On De c 4, 2006.<br />
The<br />
cheque was dishonoured subsequently.<br />
o On Dec 4, 2006 IM issued cheque of Rs.80m to FNEL for credit into account of AFQ. The cheque<br />
was dishonoured.<br />
42
o On December 4, 2006 Muhammad Hasan (MH), client of Mossa Noor Muhammad Shehzada &<br />
Co. <strong>Securities</strong> (MNMS) bought 2,400,000 shares of CTTL. Against these purchases IM paid<br />
cheques amounting to Rs.205,640,418 to the MNMS on Dec 7, 2006, however the cheques were<br />
dishonored. Details of the cheques<br />
are as under:<br />
Date Cheque No Amount Drawn on Payer Payee<br />
Dec 7, 2006 7706229 Rs.100,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
Dec 7, 2006 7706230 Rs.50,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
D ec 7, 2006 7706231 Rs.50,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
D ec 7, 2006 7706232 Rs.5,640,418 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
o On Dec 5, 2006 IM iss ued cheque ofRs.80m to FNEL for credit of FPSL. The cheque<br />
was<br />
dishonoured.<br />
o On Dec 6, 2006 Al-Hoqani <strong>Securities</strong> paid Rs. 50m on behalf of his client IM to OIB for its client<br />
AFQ.<br />
o Nadeem Ahmed Khan, client of OIB, <strong>and</strong> legal adviser of CTTL , transferred 227,500 shares<br />
of<br />
CTTL to IM on December 07, 2006 through<br />
CDS.<br />
Conclu sion: Above mentioned trading by IM, who is a brother of CFO of CTTL clearly indicates<br />
that<br />
CFO of the company <strong>and</strong> the Ansari Family was involved in trading of CCTL shares. Being CFO of the<br />
CTTL; he was insider to the material information relating to possible acquisition by foreign investor,<br />
bonus issue <strong>and</strong> cash dividend. The above trading activity by IM also attracts violat ion of S 15A of<br />
<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, title d-“Prohibition on stock exchange deals b y insiders” .<br />
Furthermore, he seems to be a front for th e Ansari family as 13m shares were transferred to his<br />
Account for no apparent consideration, prior to the start of the operation to acquire shares.<br />
Above<br />
mentioned trading activity is also the violation of Guideline 3 of Listed companies (Prohibition<br />
of Insiders Trading Guidelines, titled “Prohibition<br />
on dealing, communicating or counseling by<br />
insiders”.<br />
43
5.1.5.2 Wash Trades <strong>and</strong> Circular Trades<br />
Wash trade<br />
constitute those improper transactions in which there is no genuine change in actual<br />
ownership<br />
of the security. Details of instances where IM was involved in wash trades <strong>and</strong> circular trades<br />
with other<br />
members of the Group are given hereunder:.<br />
Buy/ Counter<br />
Date Sale Name Volume Counter Party Volume<br />
07-11-06 Sale Irfan Mehmood<br />
870,500 M. Ashraf Khan 830,700<br />
08-11-06 Buy Irfan Mehmood<br />
185,000 Irfan Mehmood 185,000<br />
13-11-06 Sale Irfan Mehmood<br />
800,000 M. Ashraf Khan 800,000<br />
14-11-06 Buy Irfan Mehmood 854,1 00 Irfan Mehmood 77,000<br />
16-11-06 Sale Irfan Mehmood<br />
1,502,000 Muhammad Ajmal Ansari 1,502,000<br />
17-11-06 Sale Irfan Mehmood 2,730,000 Muhammad Ajmal Ansari 1,575,200<br />
First Pakistan <strong>Securities</strong> 1,154,800<br />
Irfan Mehmood 400<br />
04-12-06 Buy Irfan Mehmood 2,600,000 Muhammad Ajmal Ansari 642,600<br />
First Pakistan <strong>Securities</strong> 1,012,000<br />
06-12-06 Sale Irfan Mehmood 3,280,300 Muhammad Ajmal Ansari 3,280,300<br />
Conclusion:<br />
It can be observed from above referred wash trades instances that members of the Group<br />
were trading among themselves. Above referred act, whereby<br />
false <strong>and</strong> misleading appearance of<br />
trading<br />
activity in the scrip was created, is a violation of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance<br />
1969.<br />
5.1.5.3<br />
Price Manipulation<br />
During the period under review instances were noted<br />
where various attempts were made by the IM to<br />
influence the price of the scrip during the trading session. On these days IM attempted to manipulate the<br />
price of the scrip<br />
by buying large quantities on uptick.<br />
Date Buy Freq Open High Low Close Volume<br />
20061201 Buy 130 88.1 97.2 88.1 97.2 500,000<br />
20061204 Buy 16 101.95 102.05 96 102.05 2,600,000<br />
20061206 Sell 16 92.45 94.1 92.1 92.1 3,280,300<br />
Please refer Annexure 10E for graphical presentation of buying/ selling on upticks or downticks for<br />
above referred activity.<br />
44
Conclusion: The trading practices adopted by IM depicted in the charts above clearly established that IM<br />
attempted to manipulate the prices <strong>and</strong> is therefore in gross violation of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong><br />
Ordinance 1969.<br />
5.1.5.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares<br />
<strong>and</strong><br />
takeove rs) Ordi nance,<br />
2002<br />
We noted various instances during the period under review when IM’s interest in the<br />
CTTL shares<br />
exceeded 10% <strong>and</strong> 25% without due disclosure <strong>and</strong> public announcement<br />
as identified in the Listed<br />
Companies (Substantial Acquisition of voting shares <strong>and</strong> takeovers) Ordin ance, 2002.<br />
Conclusion: Bas ed on above it is apparent that IM is in violation of the Ordinance. 5.1.5. 5 Change in beneficial ownership<br />
Section 222 (c) of the Companies Ordinance 1984 provides that every director, chief executive,<br />
company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
It<br />
has been observed that IM who held more than 10% shareholding in CTTL, entered into various<br />
transactions during the period<br />
under review, which requires disclosure <strong>and</strong> submission of required<br />
information to the Commission through Form-32. IM failed to submit the required information as<br />
prescribed in the section 222 of the Companies Ordinance, 1984.<br />
Conclusion: Based<br />
on above, it is established that IM violated S-222 of the Companies Ordinance 1984.<br />
5.1.5.6 Pre-open trading session activity While reviewing pre-open session bids <strong>and</strong> offers data, we observed instances<br />
where IM manipulated<br />
the CTTL shares price<br />
by placing bulk quantity orders at upper level/lower level price lock, as<br />
applicable. A summar y of Pre-open session analysis<br />
is given below:<br />
Total Total<br />
Order<br />
entered as<br />
Member Buy/ Order No. of Orders Queued Market % to Total<br />
Date Open Close code Sale Qty Lot orders Qty Price Turnover Market<br />
21-Nov 62.8 65.9 110 Buy 250,000 12 3,000,000 65.9 586,100 512%<br />
23-Nov 69.15 72.6 110 Buy 300,000 8 2,400,000 72.6 1,996,800 120%<br />
45
24-Nov 72.6 76.2 110 Buy 250,000 8 2,000,000 76.2 1,839,500 109%<br />
27-Nov 76.2 80 110 Buy 300,000 10 3,000,000 80 2,890,300 104%<br />
28-Nov 80 84 110 Buy 250,000 13 3,250,000 84 7,204,000 45%<br />
29-Nov 84 88.2 110 Buy 250,000 1 250,000 88.2 10,518,600 2%<br />
30-Nov 88.2 92.6 110 Buy 200,000 10 2,000,000 92.6 4,568,500 44%<br />
1-Dec 92..60 97.2 110 Buy 200,000 10 2,000,000 97.2 15,376,600 13%<br />
4-Dec 97.2 101.95 110 Buy 200,000 7 1,400,000 102.5 15,554,200 9%<br />
Conclusion: Above instances tantamount to market manipulation of CCTL price <strong>and</strong> therefore attracts<br />
provisions of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.5.7 Pumping <strong>and</strong> dumping<br />
While reviewing the trading pattern of the IM, it has been observed that he bought<br />
bulk quantity of<br />
CTTL shares at lower<br />
rates <strong>and</strong> subsequently the shares were sold at higher rates. Please refer table<br />
5.1.5.1<br />
Conclusion: The above mentioned analysis of trading activities of IM leads to a conclusion that in the<br />
first instance prices hike up attempts were made through buying activity at upticks <strong>and</strong> then after when<br />
desired/favorable rates attained, such pumping <strong>and</strong> dumping trading practices<br />
were adopted to realize<br />
gains.<br />
The above referred trading activities by IM is tantamount to an offence under S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong> Ordinance 196 9.<br />
5.1.5.8 Violation of Blank Selling Regulations<br />
Conclusion: IM was gifted 13 million shares by the Ansari family <strong>and</strong> therefore subsequent sale of<br />
shares<br />
amounting to 2.4 million does not tantamount to blank sale.<br />
5.1.5.9 Trading by Directors <strong>and</strong> major shareholders<br />
S-224 of the Companies Ordinance 1984 provides that, where any director, chief executive …. beneficial<br />
owner of more than ten percent….. make any gains by the purchase<br />
<strong>and</strong> sales, or the sale <strong>and</strong><br />
purchase,…. with in a period of less than six months…. shall make a report <strong>and</strong> tender the amount of<br />
such gain to the company <strong>and</strong> simultaneously send <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission. W e noted that no such report was made or gain was tendered by IM.<br />
46
Conclusion: Above referred lapse on th e part of IM is a gross vio lation of S-224 of<br />
the Companies<br />
Ordinanc e, 1984.<br />
General Information: Details as per the CNIC are given hereunder:<br />
Name Irfan Mehmood Father<br />
Name Syed Mehmood ul Hasan<br />
Date of Birth Oct 15, 1971<br />
CNIC No. 42201-0315094-7<br />
Family No. L23P5C<br />
Address<br />
House No. A-1 (ST-19/A), Street Gulistan Jauhar Block 16, Karachi<br />
Details of the nominee from the account<br />
opening form of Al-Hoqani <strong>Securities</strong> are as follows:<br />
Name of nominee Kamran Mehmood (Cutting observed as initially Imran Mehmood’s name was<br />
entered)<br />
Father Name<br />
Syed Mehmood ul Hasan (No cutting observed)<br />
CNIC No. 42000-0420193-9 (Cutting observed as initially 42000-0420195-3 was written)<br />
Address<br />
19-A, ST A-1, Block 16, Gulistan-e-Jauhar, Karachi<br />
Tel Nil (cutting observed as initially 0300-8207795 was written)<br />
Conclusion<br />
Based on the observations noted above it is evident that Mr. Irfan Mehmood, acting in concert with other<br />
members<br />
of the group, was involved in blatant insider trading. IM was also found violating the<br />
securities<br />
law by manipulating the price of the scrip <strong>and</strong> indulged in wash sales. By indulging in above<br />
referred manipulative <strong>and</strong> prohibitive activities IM has violated various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance<br />
1969, Section 15A<br />
•<br />
Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (ii),(iii),(iv),v) <strong>and</strong> (vi)<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ordinance, 2002-Section-4 <strong>and</strong><br />
•<br />
Section-5<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
47
5.1.6 HISAR ANSARI (HA) - Group Member:<br />
HA is a client of Foundation <strong>Securities</strong> <strong>and</strong> is a trader at Al-Hoqani <strong>Securities</strong>. HA has instructed<br />
Foundation<br />
<strong>Securities</strong> in writing to transfer all securities purchased <strong>and</strong> sales proceeds realized to Al-<br />
Hoqani <strong>Securities</strong>. It seems<br />
that HA is being used as a dummy by Al-Hoqani <strong>Securities</strong> for trading with<br />
another member of the stock exchange <strong>and</strong> to hide the trail of the actual beneficial owner. This practice<br />
has been prohibited through a directive of<br />
the Commission to members of all exchanges. Further, all the<br />
payments to Foundation<br />
<strong>Securities</strong><br />
were made through cheque by Al-Hoqani <strong>Securities</strong>. The total shares<br />
position of H A as at Dec 8, 2006 includes:<br />
Shares in Shares Shares placed under % age of total paid<br />
CDS under CFS Repo Arrangement Total Holding up capital<br />
0 0 0 0 0<br />
5.1.6.1 Tradin g pattern<br />
in Ready Market<br />
During the period under review HA has following trading pattern:<br />
Open.<br />
Buy Sell Average Average Average Financee<br />
Date Position<br />
CFS Volume Volume price Buy Sell Qty<br />
Market<br />
Volume<br />
%age of<br />
market<br />
Volume<br />
29 Nov 2006 - 250,000 88.20 - 22,050,000 - 10,518,600 2.38<br />
01 Dec 2006 - 1,276,300 97.20 - 124,056,360 - 15,376,600 8.30<br />
Total - 1,526,300 - 146,106,360<br />
Buy – Sale = (1,526,300)<br />
o<br />
HA has instructed Foundation <strong>Securities</strong> in writing to transfer all securities purchased <strong>and</strong> sales<br />
proceeds realized to Al-Hoqani <strong>Securities</strong>.<br />
o All the payments to Foundation <strong>Securities</strong> were made through<br />
<strong>Securities</strong>.<br />
cheque drawn by Al-Hoqani<br />
Mr. Shahid Ali, CEO of Al Hoqani <strong>Securities</strong> was<br />
informed about the about referred evidences that<br />
support that HA was trading on account of proprietary trading of Al-Hoqani <strong>Securities</strong>. However, Mr.<br />
Shahid denied such charge <strong>and</strong> informed that HA was trading on the basis of instructions received<br />
from IM, a client of Al-Hoqani <strong>Securities</strong> <strong>and</strong> an active member of the Group. Subsequently on January<br />
16, 2007, the Al Hoqani <strong>Securities</strong> provided the following written statement:<br />
“This is to confirm you that our trader Mr. Muhammad Hisar Ansari have sold 1,250,000 shares of Callmate<br />
Telips Telecom through M/s Foundation <strong>Securities</strong> (Pvt) Limited on instruction of Mr. Irfan Mehmood on<br />
48
December 1, 2006. Please also note that proceeds from these sale have been transferred to Mr. Irfan Mehmood<br />
account maintained with us. “<br />
Conclusion: Based on above it can be concluded that Hisar Ansari, with the knowledge <strong>and</strong> permission<br />
of Al-Hoqani <strong>Securities</strong>, was trading on behalf of Irfan Mehmood <strong>and</strong> assisting a Group of persons<br />
involved in insider trading. Al-Hoqani <strong>Securities</strong> <strong>and</strong> Foundation <strong>Securities</strong> knowingly allowed HA to<br />
open an account <strong>and</strong> trade in shares knowing full well that the beneficial owner was IM.<br />
5.1.6.2<br />
Wash Trades <strong>and</strong> Circular Trades<br />
Wash trade constitute those improper transactions in which there is no genuine change in actual<br />
ownership of the security. Details of instances where HI was involved in wash trades <strong>and</strong> circular trades<br />
with<br />
other members of the Group are given hereunder:.<br />
Date Buy/<br />
Counter<br />
Sale Name Volume Counter Party<br />
Volume<br />
29-11-06 Sale Hisar Ansari 250,000Asim Fayyaz Qureshi 250,000<br />
01-12-06 Sale Hisar Ansari 1,276,300Asim Fayyaz Qureshi 1,276,300<br />
Conclusion: It can be obs erved f rom above referred w ash trade s instances that mem bers of the G roup<br />
were doing trading among themselves. Above r eferred act whereby false <strong>and</strong> misleading appearan ce of<br />
trading activity in the scrip was created, is a violation of S- 17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.6.2<br />
Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
No instances of violation were found.<br />
5.1.6.3<br />
Price Manipulation<br />
No instances of violation were found.<br />
5.1.6.4 Change in beneficial ownership<br />
No instances of violation were found.<br />
5.1.6.5 Pre-open trading session activity<br />
No instances of violation were found.<br />
5.1.6.6 Pumping <strong>and</strong> dumping<br />
49
No instances of violation were found.<br />
5.1.6.7 Violation of Blank Selling Regulations<br />
Conclusion: HA sold 1.5 million shares at a time when he did not possess any beneficial interest in the<br />
shares. Prima facie evidence suggest that HA is in violation of Blank Selling Regulations <strong>and</strong> is guilty<br />
under section 17(e) of <strong>Securities</strong> & <strong>Exchange</strong> Ordinance 1969<br />
General Information:<br />
Details<br />
as per the CNIC are given hereunder:<br />
Name Muhammad Hisar Ansari<br />
Father Name Abdul Latif<br />
Date of Birth Dec 1, 1962<br />
CNIC No. 42201-8853683-9<br />
Family No. L6D8GR<br />
Address House No. K-771, Area K, Korangi, Karachi<br />
Conclusion Based on the observations noted above it is evident that HA acting in concert with<br />
other members of the<br />
group,<br />
was involved in blatant insider trading. HI was also found violating the securities law by<br />
manipulating the price of the scrip <strong>and</strong> indulged in wash sales. By indulging in above referred<br />
manipulative <strong>and</strong> prohibitive activities HI has violated various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A<br />
• Listed<br />
companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (iii) <strong>and</strong> (v)<br />
• Listed Companies (Substantial Acquisitions of voting shares<br />
<strong>and</strong> takeovers) Ordinance, 2002-Section-4 <strong>and</strong><br />
•<br />
Section-5<br />
Companies Ordinance 1984- S-222 (c) <strong>and</strong> S-224<br />
50
5.1.7 NADEEM AHMED KHAN (NAK) - Group Member:<br />
He<br />
is a part of the legal Firm Ahmed & Qazi Associates, which is the legal advisor of CTTL (Please refer<br />
published accounts for the year ended June 30, 2005<br />
as well as Accounts for the six month ended Dec 21,<br />
2005). NAK traded with OIB. <strong>and</strong> opened an account with OIB on November 21, 2005.<br />
The total shares position of NAK as at Dec 8, 2006 includes:<br />
Shares in Shares<br />
Shares placed under<br />
% age of total<br />
CDS under CFS Repo Arrangement<br />
Total Holding paid up capital<br />
60,100 1,055,800 0<br />
1,115,900 1.7%<br />
5.1.7.1 Trading pattern in Ready Market<br />
During the period under review trading position of NAK is given below:<br />
Open CFS<br />
Date Position<br />
Ready<br />
Buy<br />
Ready<br />
Sale<br />
Avg.<br />
Price Buy Value<br />
Sale<br />
Value<br />
Financee<br />
Qty<br />
7-Nov-06 - 455,900 - 54.9 25,028,910 - -<br />
10-Nov-06 - - - - - - 750,000<br />
13-Nov-06 750,000 - - - - - 750,000<br />
14-Nov-06 750,000 - - - - - 750,000<br />
15-Nov-06 750,000 - - - - - 750,000<br />
16-Nov-06 750,000 - - - -<br />
- 750,000<br />
17-Nov-06 750,000 - - - - - 750,000<br />
20-Nov-06 750,000 - - - - - 760,800<br />
21-Nov-06 760,800 - - - -<br />
- 760,800<br />
22-Nov-06 760,800 - - - - - 905,800<br />
23-Nov-06 905,800<br />
- - - - - 905,800<br />
24-Nov-06 905,800 - - - - - 905,800<br />
27-Nov-06 905,800 - - - - - 905,800<br />
28-Nov-06 905,800 - - - - - 905,800<br />
29-Nov-06 905,800 160,000 - 88.2 14,112,000 - 1,055,800<br />
30-Nov-06 1,055,800 - - - - - 1,055,800<br />
1-Dec-06 1,055,800 - - - - - 1,055,800<br />
4-Dec-06 1,055,800 - - - - - 1,055,800<br />
5-Dec-06 1,055,800 - - - - - 1,055,800<br />
6-Dec-06 1,055,800 - - - - - 1,055,800<br />
7-Dec-06 1,055,800 - - - - - 1,055,800<br />
8-Dec-06 1,055,800 - - - - - 1,055,800<br />
TOTAL 615,900 39,140,910 -<br />
Buy – Sale = 615,900<br />
51
o On December 4, 2006 through a Journal Voucher, entire ledger balance of Rs.7,888,419.16 CR at OIB. ,<br />
o<br />
pertaining to Mr. Tariq Jawed (TJ) was transferred to NAK’s Account. Prima Facie evidence suggests<br />
that TJ was trading on account of NAK <strong>and</strong> therefore the credit balance to his account was<br />
transferred to the real owner of the shares. It should be noted that NAK is a lawyer<br />
of CTTL <strong>and</strong> is<br />
an insider being aware of the unpublished price sensitive information relating to possible Saudi<br />
takeover <strong>and</strong> audit qualifications. A written request from TJ was received wherein TJ instructed the<br />
Brokerage house to sell all CTTL shares in his account <strong>and</strong> transfer the entire sale proceeds to NAK’s<br />
Account.<br />
Furthermore while reviewing NAK’s account opening form appeared that he had designated Mr.<br />
Kabir Ahmed, as his nominee, <strong>and</strong> had identified Mr. Kabir as his colleague. Contact list given at the<br />
web site of Ahmed & Qazi Associates contain name of Mr. Kabir<br />
section.<br />
Ahmed under administration<br />
o NAK Transferred 227,500 shares of CTTL to IM on December 07, 2006<br />
through CDS without any<br />
apparent consideration. Conclusio n: Being legal advisor<br />
to the Company, NAK was insider to material information relating<br />
to possible acquisitio n by Saudi Group as well as the audit qualifications. The above<br />
trading activity by<br />
NAK also attracts violatio n of S 15A of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinanc e 1969 , titled-“ Prohibition<br />
on stock exchange deals<br />
by insiders”.<br />
“Above mentioned trading a ctivity is also a v iolation of Guidelin e 3 of Listed companies<br />
(Prohibition<br />
of Insiders Trading Guidelines, titled “Prohibition on dealing, communicating or counseling by<br />
insiders”.<br />
5.1.7.2 Was h Trades <strong>and</strong> Circular Trades No instance s were foun d.<br />
5.1.7.3 Pri ce Manipula tion<br />
No instanc es of violatio n were found.<br />
5.1.7.3 Non-complian ce of Listed Companies ( Substantial Acquisitio n of voting shares<br />
<strong>and</strong><br />
takeovers) Ordinan ce,<br />
2002<br />
No instances of non-compliance were found.<br />
52
5.1. 7.4 Change in beneficial ownership<br />
No instances of non-compliance were found.<br />
5.1. 7.5 Pre-open trading session activity<br />
No violations of trading in pre-open were found.<br />
5.1. 7.6 Pumping <strong>and</strong> dumping<br />
No trading practices<br />
which revealed pumping <strong>and</strong> dumping were found.<br />
5.1 .7 .7 Violations of Blank Selling Regulations<br />
No instances of violations were found.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
N ame Nadeem Ahmed Khan<br />
Fat her Name Abdul Raheem Khan<br />
Date<br />
of Birth Nov 2, 1962<br />
CNIC<br />
No. 31202-1137279-9<br />
Family<br />
No. 8K865C<br />
Present<br />
Address House No.404, Clifton Centre, Karachi<br />
Permanent<br />
Address House No. 100-A, Welcome Gate Colony, Bahawalpur<br />
Details of the nominee from the account opening<br />
form of OIB are as follows:<br />
Name<br />
of nominee Kabir Ahmed<br />
Father Name Quddos Khan<br />
CNIC<br />
No. 42401-1748528-3<br />
Address House No. 67, Street 3, Sector 3, Hub River Road, Haroon Bahria Complex,<br />
Karachi, Dakkhana Housing Society.<br />
Relatio n Colleague (Website of the<br />
law firm Ahmed & Qazi Associates indicate name of<br />
Mr. Kabir Ahmed as administration personnel of the firm)<br />
CONCLUSION<br />
Based on the observations noted<br />
above it is evident that NAK acting in concert with other members of<br />
the Group, was involved in blatant insider<br />
trading. By indulging in above referred prohibitive activities<br />
NAK<br />
has violated various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A<br />
• Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
53
5.1.8 FIRST PAKISTAN SECURITIES Limited (FPSL) - Group Member:<br />
FPSL is a member of the Lahore Stock <strong>Exchange</strong>.<br />
It has been trading with FNEL <strong>and</strong> OIB.<br />
• The names of directors of FPSL are as follows:<br />
Mrs. Adeela Ali (w/o Mr. Ali Aslam Malik)<br />
Chief Executive<br />
Mr. Ali Raza Jaffery (S/o Muhammad Raza Jaffery) Director<br />
Ahmad Bilal Malik (s/o<br />
Malik Ijaz Ahmad) Director<br />
Rais Ahmed Dar (S/o Muhammad Allah Ditta) Director<br />
• Chattah Khan & Raza are the Legal Advisor,<br />
<strong>and</strong> Rahman Sarfraz & Co are Auditors of the<br />
Company<br />
It is pertinent to mention here that FNEL is an associate company of First Pakistan <strong>Securities</strong> Limited. It<br />
should be noted that presently those clients who<br />
are trading at KSE by placing their orders through the<br />
members of LSE <strong>and</strong> ISE, are not identified through<br />
UIN. Brokers of LSE <strong>and</strong> ISE use their own<br />
proprietary codes when trading on their own<br />
accounts, whereas in order to identify client trading, a<br />
suffix (/) is added with the proprietary code<br />
of broker. When the investigation was started against FPSL<br />
we were informe d the almost all the trading of FPS pertains to its client, IM. We were further informed<br />
by FPSL that throughout the period under review, IM has been trading substantial<br />
quantities of of CTTL<br />
shares without having received or made any payment to the brokerage house.<br />
The Brokerage house was<br />
requested<br />
to provide additional information to enable further investigation in the matter. However,<br />
based on the available information, it<br />
is prima facie apparent that IM was an undisclosed customer of<br />
FPSL <strong>and</strong> was trading through the FPS. IM opened his account at FPSL on Nov 16, 2006. Mr. Ali Malik<br />
informed us that OIB introduced IM to FNEL <strong>and</strong> FPSL <strong>and</strong> that they did not have any direct connection<br />
with IM.<br />
The total shares position<br />
of FPSL on account of IM as at Dec 8, 2006 is:<br />
Shares in Shares Shares placed under % age of total paid<br />
CDS under CFS Repo Arrangement Total Holding up capital<br />
0 4,818,500 450,000 5,268,500 8%<br />
5.1.8.1 Trading pattern in Ready Market<br />
During the period under review trading position of FPSL A/c IM is given below:<br />
54
Open CFS Buy Sale Buy / Sale Financee Market<br />
Date Position Volume Volume Avg. Price Buy Value Sale Value Qty Volume<br />
07 Nov 2006 - - 1,000 52.25 - 52,250 - 6,640,900<br />
16 No v 2006 - 38,500 - 56.72 2,183,592 - 38,500 6,022,600<br />
17 No v 2006 38,500 5,395,500 88,400 59.09/58 .46 318,824,646 5,167,864 5,395,500 12,585,300<br />
20 Nov 2006 5,395,500 600 - 62.80 37,680 - 5,396,100 690,900<br />
21 Nov 20 06 5,396,100 700 - 65.90 46,130 - 5,396,800 586,100<br />
22 Nov 2006 5,396,800 89,400 - 69.15 6,182,010 - 5,486,200 1,614,700<br />
23 Nov 20 06 5,486,200 169,000 100 72.60/72.60 12,269,40 0 7,260 5,655,100 1,996,800<br />
24 Nov 2006 5,655,100 227,100 - 76.20 17,305,02 0 - 5,625,500 1,839,500<br />
28 Nov 2006 5,549,500 2,001,000 1,210,000 84.00/84.00 168,084,000<br />
101,640,000 6,330,500 7,204,000<br />
29 Nov 2006 6,330,500 - 25,000 88.15 - 2,203,750 6,315,500 10,518,600<br />
30 Nov 2006 6,315,500 1,622,500 575,000 92.60/92.60 150,243,500 53,245,000 7,953,000 4,568,500<br />
01 Dec 2006 7,953,000 1,165,500 25,000 97.20/97.20 113,286,600 2,430,000 9,068,500 15,376,600<br />
04 Dec 2006 9,06 8,500 - 2,800,000 102.05 - 285,740,000 5,768,500 15,554,200<br />
05 Dec 2006 5,768, 500 25,000 600,000 96.90/97.18 2,422,500 58,310,000 4,818,500 8,769,500<br />
07 Dec 2006 4,818,500 - 18,100 87.50 - 1,583,750 4,818,500 322,700<br />
08 Dec 2006 4,818,500 - 6,200 83.15 - 515,530 4,818,500 75,600<br />
Total 10,734,800 5,348,800 790,885,028 510,895,404<br />
Buy – Sale = 5,386,000<br />
Conclusion: It is evident that IM was trading on behalf of his brother Imran Mehmood, CFO of CTTL<br />
as he only started trading on Nov 17, 2006 <strong>and</strong> traded in CTTL exclusively. Essentially IM was fronting<br />
for Imran Mehmood who being CFO of the company, was insider to the material information relating to<br />
possible acquisition by Saudi Group, possible bonus <strong>and</strong> cash dividends as well as the audit<br />
qualifications. FPSL by allowing IM to trade <strong>and</strong> hiding his identity was aiding <strong>and</strong> abetting in<br />
committing the crime of insider trading, wash sales <strong>and</strong> price manipulation.<br />
The above trading activity by IM is a violation of S 15A of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969,<br />
titled-“Prohibition on stock exchange deals by insiders”.<br />
Above mentioned trading activity is also a violation of “Guideline 3 of Listed companies (Prohibition<br />
of Insiders Trading Guidelines” titled “Prohibition on dealing, communicating<br />
or counseling by insiders.<br />
5.1.8.2 Wash Trades <strong>and</strong> Circular Trades<br />
Wash<br />
trade constitute those improper transactions in which there is no genuine change in actual<br />
ownership<br />
of the security. Details of instances where FPS A/c IM was involved in wash trades <strong>and</strong><br />
circular trades with other Group members are<br />
given hereunder.<br />
55
Buy/<br />
Counter<br />
Date Sale<br />
Name Volume Counter Party Volume<br />
17-11-06 Buy First Pakistan <strong>Securities</strong> 5,39 5,500 Irfan Mehmood 1,154,<br />
80 0<br />
First Pakistan <strong>Securities</strong> 88,400<br />
28-11-06 Buy First Pakistan Sec 2,001,000 First Pakistan <strong>Securities</strong> 1,219,000<br />
29-11-06 Sale First Pakistan Sec 25,000 Muhammad Ajmal Ansari 25,000<br />
30-11-06 Buy First Pakistan Sec 1,622,500 First Pakistan <strong>Securities</strong> 575,000<br />
Muhammad Ashraf Khan 8,000<br />
04-12-06 Sale First Pakistan Sec 2, 800, 000 Naved Haider Bukhari 1,788,000<br />
Irfan Mehmood 1, 012,000<br />
Further review of table 5 .1.8.1 shows instances where substantial quantities of shares were bought <strong>and</strong><br />
on the same day were squared up at t he same rate. Refer Trading on Nov 28, 2006 <strong>and</strong> Nov 30, 2006.<br />
Conclusion: It can be observed from above referred wash trades instan ces that members of the Group<br />
were trading among themselves, thus projecting false <strong>and</strong> misleading appearance of trading activity<br />
in<br />
the scrip <strong>and</strong> is therefore<br />
a violation of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.8.3 Price Manipulation<br />
During the period under review FPS A/c IM has been involved in active buying <strong>and</strong> selling of CTTL<br />
shares (5.1.8.1), some times exceeding 42% of the market turnover of the particular day (Refer Trading on<br />
Nov 17, 2006).<br />
Additionally an instance, mentioned below, has been noted where an attempt<br />
was made by FPS A/c IM<br />
to influence the price during the trading session.<br />
Date Buy Freq Open High Low Close<br />
Volume<br />
17 Nov 2006 Buy 126 57.75 59.85 57.2 59.85 5,395,500<br />
Please refer Annexure 10F for graphical presentation for above referred activity.<br />
Conclusion:<br />
The above referred trading activities by FPS A/c IM is a violation of S-17 e of <strong>Securities</strong> <strong>and</strong><br />
<strong>Exchange</strong><br />
Ordinance 1969.<br />
5.1.8.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
We have noted that during the period under review, interest of FPS A/c IM, in CTTL shares exceeded<br />
the 10%<br />
threshold i.e. on Nov 28, 2006, disclosure as required in the Listed Companies (Substantial<br />
56
Acquisition of voting<br />
shares <strong>and</strong> takeovers) Ordinance, 2002 was not made. Furthermore on Nov 30,<br />
20 06 <strong>and</strong> Dec 1,<br />
2006 when FP S A/c IM had exposure o f 7,953,000 <strong>and</strong> 9,068, 500 shares<br />
representing<br />
12.17% <strong>and</strong> 13.87% holding respectively in the company, however no disclosures wer e made.<br />
5.1.8.5<br />
Change in beneficial ownership<br />
Sectio n 222 (c) of the Companies Ordinance 1984 provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company<br />
shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on Form-32<br />
for change in its shareholding, within 15 days of the change.<br />
It has been observed that FPS A/c IM has increased its shareholding beyond 10% on Nov 28, 2006, that<br />
remained above 10% till Dec 1, 2006. Such shareholding required submission of Form-32 to SECP.<br />
However, FPS A/c IM failed to submit required information as prescribed in the section 222 of the<br />
Companies Ordinance, 1984.<br />
Conclusion: However IM failed<br />
to submit the required information as prescribed in the section 222 of<br />
the Companies Ordinance, 1984.<br />
5.1.8.6 Pre-open trading session activity<br />
While<br />
reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where FPS A/c IM<br />
manipulated the CTTL shares price by placing bulk quantity orders at upper level/lower level price<br />
lock, as applicable. An analysis of Pre-open session has revealed<br />
an abnormal trading behavior by FPS<br />
th at has been summarized below: Member Buy/ Order No. of<br />
Total<br />
Orders Queued<br />
Date Open Close code Sale Qty Lot orders Qty Price<br />
Total<br />
Market<br />
Turnover<br />
Order<br />
entered as<br />
% to Total<br />
Market<br />
24-Nov 72.6 76.2 175 Buy 300,000 8 2,400,000 76.2 1,839,500 130.47%<br />
Buy 300,000 7 2,100,000<br />
27-Nov 76.2 80 175<br />
100,000 1 100,000 80 2,890,300 76.12%<br />
Buy 200,000 9 1,800,000<br />
30-Nov 88.2 92.6 175 125,000 1 125,000 92.6 4,568,500 42.14%<br />
1-Dec 92..60 97.2 175 Bu y 200,000 7 1,400,000 97.2 15,376,600 9.10%<br />
Buy 100,000 3 300,000<br />
4-Dec 97.2 101.95 175<br />
200,000 8 1,600,000 102.05 15,554,000 12.22%<br />
7-Dec 92.1 87.5 175 Sale 200,000 10 2,000,000 87.5 322,700 619.77%<br />
57
Conclusion: Above instances tantamount to market manipulation by IM A/c FPS <strong>and</strong> is therefore a<br />
violation of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance, 1969.<br />
5.1.8.7 Pumping <strong>and</strong> dumping<br />
While reviewing the trading activity of FPS A/c IM, it has been observed that they bought bulk quantity<br />
of CTTL shares at lower values <strong>and</strong> subsequently the shares were sold at higher prices. Please refer table<br />
given in 5.1.8.1 which shows that bulk quantity of shares were bought on Nov 17 <strong>and</strong> Nov 28, 2006 at<br />
relatively lower prices whereas selling at higher prices was done on Nov 28 <strong>and</strong> Dec 4, 2006.<br />
Conclusion: The above mentioned analysis of trading activities of FPS A/c IM, is evident that in the first<br />
instance price was hiked up through huge buying activity <strong>and</strong> when desired/favorable rates were<br />
achieved shares in huge quantities were dumped <strong>and</strong> substantial gains have been realized. Classic<br />
pumping <strong>and</strong> dumping trading<br />
practice has been observed which is a violation of S-17 e of <strong>Securities</strong><br />
<strong>and</strong><br />
<strong>Exchange</strong> Ordinance 1969.<br />
5.1.8.8 Non-compliance of Short Selling Regulations<br />
No<br />
instances observed.<br />
OVERALL CONCLUSION<br />
FPS A/c IM is prima facie guilty of manipulative trade practices as explained above. Furthermore, it is<br />
evident that FPS used its own proprietary client code to hide Irfan Mehmood’s ID <strong>and</strong> thus could be<br />
accused of aiding <strong>and</strong> abetting<br />
manipulating the market in the pre-open session.<br />
IM in commission of the crime. FPS was actively involved in<br />
58
5.1.9 MIRZA USMAN BAIG (MUB) - Group Member:<br />
MUB is the client of Sherman <strong>Securities</strong>. In his account opening form, he has nominated Mr. Kamran<br />
Mehmood s/o Syed Mehmood ul Hassan, brother of CTTL CFO,<br />
as his nominee. The share position of<br />
MUB<br />
as on Dec 8, 2006 include:<br />
Shares in Shares under Shares placed under<br />
% age of total<br />
CDS CFS Repo Arrangement Total Holding paid up capital<br />
0 0 0 0 0<br />
5.9.1 Trading Pattern in Ready Market<br />
Date<br />
Open.<br />
Position CFS<br />
14 Nov 2006<br />
-<br />
Buy<br />
Volume<br />
Sale<br />
Volume<br />
100,000 35,000<br />
Buy/<br />
Sale<br />
Avg.<br />
Price<br />
54.33/<br />
55.91<br />
Avg. Buy<br />
Value<br />
Avg. Sale<br />
Value<br />
Financee<br />
Qty.<br />
Market<br />
Volume<br />
5,433,333 1,956,977 - 2,450,900<br />
15 Nov 2006 - - 15,000 56.10 - 841,500 - 2,624,600<br />
16 Nov 2006<br />
-<br />
30,000 50,000<br />
56.62/<br />
56.22<br />
1,698,700 2,810,833 - 6,022,600<br />
17 Nov 2006<br />
-<br />
483,900 513,900<br />
57.65/<br />
59.17<br />
27,898,161 30,409,356 - 12,585,300<br />
29 Nov 2006 31,500 - 6,500 80.10 - 520,650 - 10,518,600<br />
Total<br />
Buy – Sale = (6,500)<br />
613,900 620,400 35,030,194 36,539,316<br />
Conclusion: MUB by having trading connection with CFO of CTTL through his brother, is prima facie a<br />
possible Group member.<br />
5.9.2 Wash Trades <strong>and</strong> Circular Trades<br />
Counter UIN Counter<br />
Date Buyer UIN Name Volume (seller) Name Freq Volume %<br />
16- 4200006777853 Muhammad Ajmal 2000000 4220186473941 Mirza Usman Baig 3 50000 2.5<br />
17- 4220186473941 Mirza Usman Baig 483900 4220103150947 Irfan Mehmood 10 176500 36.47<br />
Conclusion: It can be observed from above referred wash trades instances that members of the Group<br />
were trading among themselves. Above referred act whereby false <strong>and</strong> misleading appearance of<br />
trading activity in the scrip was created, is a violation of S-17e(ii) of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance<br />
1969.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name Mirza Usman Baig<br />
59
Father Name Mirza Asif Baig<br />
Date of Birth Oct 15, 1971<br />
CNIC No. 42201-0315094-7<br />
Family No. L23P5C<br />
Address House No. A-1 (ST-19/A),<br />
Street Gulistan Jauhar Block 16, Karachi<br />
Details of the nominee from<br />
the account opening<br />
form of Sherman<br />
<strong>Securities</strong> are as follows:<br />
Name of nominee<br />
Kamran<br />
Mehmood (Cutting observed<br />
as initially Imran<br />
Mehmood’s name<br />
was<br />
entered)<br />
Father<br />
Name Syed Mehmood ul Hasan (No cutting observed)<br />
CNIC No. 42000-0420193-9 (Cutting<br />
observed as initially 42000-0420195-3 was written)<br />
Address 19-A, ST A-1, Block 16, Gulistan-e-Jauhar, Karachi<br />
Tel Nil (cutting observed as initially 0300-8207795<br />
was written)<br />
Conclusion<br />
Based on the observations noted above it is evident that Mr. Irfan Mehmood, acting in concert with other<br />
members of the group, was involved in blatant insider trading<br />
<strong>and</strong> wash sales. By indulging in above<br />
referred prohibitive activities MUB has violated various law<br />
<strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> O rdinance 1969, Section 15A<br />
• Listed companies (Prohibition of Insiders Trading Guidelin es), Clause<br />
3<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong><br />
Ordinance 1969, S-17(e) (iii)<br />
60
5.1.10 Muhammad Hassan (MH) - Group Member:<br />
Muhammad Hassan is the client of Moosa, Noor Mohammed, Shahzada & Co. (Pvt.) Ltd. (MNMS). MH<br />
was not seen on the sell side <strong>and</strong> had no outst<strong>and</strong>ing financing position by December<br />
08, 2006. Total<br />
share<br />
position of MH as at December 8, 2006 includes:<br />
Shares in Shares Shares placed under Repo % age of total paid<br />
CDS under CFS Arrangement Total Holding up capital<br />
3,665,000 0 0 3,665,000 5.6%<br />
5.1.1 6.1 T rading pattern<br />
in the Ready Market<br />
During<br />
the period under review, trading position of MH in Ready Market is as follows:<br />
Op en. CFS Buy Sale Avg. Avg. Buy Avg. Sale Financee Market<br />
Date Position Volume Volume Price Value Value Qty. Volume<br />
04 Dec 2006 - 2,400,000 - 102.04 244,889,296 - - 6,640,900<br />
Buy – Sale = 2,400,000<br />
On December 4, 2006 MH provided 900,000 shares of CTTL to the Moosa Noor Muhammad Shehzada<br />
& Co, as margin. CDC account activity shows that these shares were first moved from sub-account of<br />
M. Ashraf Khan to the CDC main account of FNEL <strong>and</strong> were subsequently transferred<br />
to MNMS<br />
account. On December 4, 2006 MH bought 2,400,000 shares of CTTL. Against these purchases, IM paid cheques<br />
amounting to Rs.205,640,418 to the Brokerage House on Dec 7, 2006, however the cheques were<br />
dishonored. Details of the cheques are as under:<br />
Date Cheque No Amount Drawn on Payer Payee<br />
Dec 7, 2006 7706229 Rs.100,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
Dec 7, 2006 7706230 Rs.50,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
Dec 7, 2006 7706231 Rs.50,000,000 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
Dec 7, 2006 7706232 Rs.5,640,418 St<strong>and</strong>ard Chartered, Khi Irfan Mehmood MNMS<br />
5.1.16.2 Price Manipulation<br />
UPWARD<br />
Date Buy Frequency Open High Low Close Volume<br />
04 Dec 2006 Buy 44 101.2 102.05 101.2 102 2,400,000<br />
61
Please refer Annexure 10G for graphical presentation for above referred activity.<br />
Conclusion: Above instances show that MH attempted to manipulate the market upward by buying<br />
on upticks <strong>and</strong> hence is in violation of S-17e of <strong>Securities</strong><br />
<strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.1.16.3 Non-compliance of Listed Companies (Substantial Acquisition of voting shares<br />
<strong>and</strong><br />
takeovers) Ordinance, 2002<br />
Conclusion:<br />
No instances found.<br />
5.1.16.4 Change in beneficial ownership<br />
Conclusion: No instances found.<br />
5.1.16.5 Pre- open trading session activity Conclusion:<br />
No instances found.<br />
5.1.16.6 Pumping <strong>and</strong> dumping<br />
Conclusion: No instances found.<br />
5.1.16.7<br />
Non-compliance of Short Selling Regulations<br />
Conclusion: No instances found.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name<br />
Muhammad Hasan<br />
Father Nam e Muhammad Ali<br />
Date of Birth 1961<br />
C NIC No. 42301-8865871-1 Fa mily No. J8D0RF<br />
Address<br />
Parsa View, Flat No. X-306, Saddar Town, Main Clifton Road, Karachi<br />
Nominee person as per the account opening form of MNMS:<br />
Name<br />
of nominee Shamim Khan<br />
Husb<strong>and</strong> Name Muhammad<br />
Hasan<br />
CNIC 42301-1769836-4<br />
Address Parsa View, Flat No. X-306, Saddar Town, Main Clifton Road, Karachi<br />
62
CONCLUSION<br />
Based on the observations noted above it is evident that MH, acting in concert with other members of the<br />
group, was involved in blatant insider trading. MH was also found violating the securities law<br />
manipulating the price of the scrip <strong>and</strong> indulging in wash sales. By indulging in above<br />
referred<br />
manipulative<br />
<strong>and</strong> prohibitive activities IM has violated various law <strong>and</strong> regulations such as:<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A<br />
•<br />
Listed companies (Prohibition of Insiders Trading Guidelines), Clause 3<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) (ii) <strong>and</strong> (iii)<br />
by<br />
63
5.2 FINDINGS RELATED TO BROKERS<br />
A broker holding a certificate of registration under the Brokers <strong>and</strong> Agents Registration Rules,<br />
2001 (“the Brokers Rules”) is required to abide by the code of conduct specified in these rules.<br />
Failure to abide by the code of conduct is a breach of Rule 12 of the Brokers Rules <strong>and</strong> may be<br />
penalized under Rule 8 thereof.<br />
Under the code of conduct, a broker is duty bound inter<br />
alia, to act with due skill, care <strong>and</strong><br />
diligence in the conduct of all his business. Further, a broker is not expected to indulge in any<br />
act which is detrimental to investors’ interest or which leads to interference with smooth <strong>and</strong><br />
fair functioning of the market. As a market participant, it is the obligation of the broker to<br />
protect the interest of investor <strong>and</strong> to ensure fair, efficient <strong>and</strong> transparent market. They are<br />
expected to maintain high st<strong>and</strong>ard of integrity, professionalism <strong>and</strong> fairness in the conduct of<br />
their business.<br />
During the course of investigation, we have noted that brokers identified in the preceding section<br />
of the report, have acted in collusion with the clients to manipulate the price, undertook market<br />
manipulations <strong>and</strong> moreover active party to insider trading being perpetuated by CEO & CFO<br />
of CTTL. These activities are the violation of R-12 of Brokers <strong>and</strong> Agents Registration Rules, 2001<br />
that prescribe the code of conduct for the brokers.<br />
You may also refer to the KATS regualtons here. It will then become easier to follow the<br />
subsequent sections.<br />
64
5.2.1 Orix Investment Bank Limited (OIB)<br />
You<br />
should state at the outset that OIB is a registered broker <strong>and</strong> therefore bound by the appropriate<br />
regulations.<br />
OIB played a major role, as the main hub for the insider trading <strong>and</strong> market manipulation<br />
activities<br />
by the Group. It has been found that during the period of Oct-November 2006 Mr. Ajmal<br />
Ansari, Asim Fayyaz Qureshi <strong>and</strong> Muhammad Ashraf Khan, key member of the Group, opened their<br />
account s with the OIB <strong>and</strong> started trading in the CTTL shares.<br />
This finding is supported by the evidence collected by the Commission as well as admitted by the key<br />
officials<br />
of the OIB in their meeting with SECP on December 11, 2006. The trading pattern of the<br />
brokerage house during the<br />
period under review is given hereunder:<br />
CFS CFS CFS<br />
CFS Open CFS Open Ready<br />
Release Release Close CFS Close<br />
Date Buy Sale Buy Ready Sale Buy Sale Buy Sale<br />
07-NOV-06 - 13,500 1,573,600 51,000 - 11,000 1,046,000 850,700<br />
08-NOV-06 850,700 1,048,500 571,300 183,000 21,000 163,900 676,700 538,800<br />
10-NOV-06 1,368,500 1,561,300 293,500 16,500 1,368,500 1,487,300 868,700 1,362,000<br />
13-NOV-06 1,362,000 942,700 6,000 12,000 - 199,400 774,200 6,000<br />
14-NOV-06 1,368,000 1,517,500 54,000 36,000 - 517,400 305,800 -<br />
15-NOV-06 1,368,000 1,305,900 42,500 14,500 - 333,800 529,900 -<br />
16-NOV-06 1,368,000 1,502,000 2,364,000 189,600 1,000 512,900 2,500,000 2,105,000<br />
17-NOV-06 3,472,000 3,489,100 1,832,200 767,500 100,000 546,300 2,910,000 1,834,200<br />
20-NOV-06 5,206,200 5,852,800 10,800 11,100 - - 478,900 10,800<br />
21-NOV-06 5,217,000 6,331,700 - - - 454,800 371,300 -<br />
22-NOV-06 5,217,000 6,248,200 54,600 - 1,500,000 1,872,300 1,275,300 172,600<br />
23-NOV-06 3,889,600 5,651,200 468,000 - 5,000 795,100 819,300 456,000<br />
24-NOV-06 4,340,600 5,675,400 58,000 - 2,003,000 1,548,100 576,400 132,000<br />
27-NOV-06 2,469,600 4,703,700 2,021,200 2,020,600 27,000 1,804,300 1,758,600 2,011,000<br />
28-NOV-06 4,453,600 4,658,000<br />
1,315,700 1,275,000 - 1,779,000 1,682,100 1,255,600<br />
29-NOV-06 5,709,200 4,561,100 6,090,400 437,700 100,200 707,900 1,256,700 6,026,500<br />
30-NOV-06 11,635,500 5,109,900 1,201,000 1,310,800 7,500 364,100 450,000 690,000<br />
01-DEC-06 12,318,000 5,195,800 2,182,900 3,352,000 385,700 128,000 140,800 2,078,300<br />
04-DEC-06 14,010,600 5,208,600 9,000 5,907,600 5,867,500 2,959,100 912,900 -<br />
05-DEC-06 8,143,100 3,162,400 - 4,546,800 4,498,500 1,530,800 1,600,000 -<br />
06-DEC-06 3,644,600 3,231,600 3,505,600 40,000 - 140,100 2,056,900 3,440,600<br />
07-DEC-06 7,085,200 5,148,400 - - - 173,100 - -<br />
08-DEC-06 7,085,200 4,975,300 - - - 10,000 - -<br />
23,654,300 20,171,700<br />
As per R-17(a) of the Karachi Automated Trading System (KATS) Regulations of the Karachi Stock<br />
<strong>Exchange</strong> (Guarantee) Limited, “a member shall be responsible for all orders entered from his trading<br />
65
workstation(s). Furthermore as per code of the conduct as prescribed in the Brokers Rules a broker shall<br />
not create a false market either singly or in concert with others or indulge in any act detrimental to the<br />
investor’s interest or which leads to interference with the fair <strong>and</strong> smooth functioning of the market.<br />
Keeping in view the trading pattern as well as the documents received from the brokerage house<br />
during the period under review it appears that:<br />
• Substantial trading in CTTL shares took place through OIB<br />
(refer trading days Nov 27 <strong>and</strong> Nov<br />
28, 2006) at the same rate that depict that false impression of active trading in the scrip i.e. wash<br />
sales.<br />
• An activity of Pumping <strong>and</strong> dumping was also being conducted<br />
through the brokerage house<br />
as the shares were being bought at lower prices <strong>and</strong> after creating artificial hype in the market,<br />
shares were being sold at substantially<br />
higher prices.<br />
• On Nov 29 , 2006 AFQ bought<br />
5,844,500<br />
shares from OIB . In order to avoid disclosure as<br />
required under Listed Companies (Substantial Acquisition of voting shares <strong>and</strong> takeovers)<br />
Ordinance, 2002, OIB colluded with the client such that the purchase of AF Q was broken<br />
between MAA (2,944,500 shares) <strong>and</strong> A FQ (2,900,000 shares). • Various instances were noted where OI B made payments to the client s <strong>and</strong> received payments<br />
from the clients of other brokerage house s directly, who were part of th e Group.<br />
• On Nov 27, 2006 two clients of Or ix Investment Bank. Mr. Muhammad Ajmal Ansari <strong>and</strong> Asim<br />
Fayyaz Qureshi sold <strong>and</strong> bought respective ly 2,00 0,000 shares of CTTL through explicit cross<br />
transaction at KATS that did not change the beneficial ownership a s transaction was done<br />
between colluding parties <strong>and</strong> thus the same tantamount to wash<br />
sales.<br />
• In a very unusual instance, a s admitted by the Brokerage Hou se in its written statement to the<br />
Commission, OIB on Dec 6, 2006 purchased 3,440, 600 shares from the ready market on account<br />
of Mr. Muhammad Ajmal Ansari, against a cheque received from Al-Hoqani Securit ies for the<br />
credit of Asim Fayyaz Qureshi. Record s received from Al- Hoqani <strong>Securities</strong> s how that<br />
this<br />
amount was given apparently on the instructions of Irfan Mehmood.<br />
• An instance has been observe d on November 10, 2006 when OIB sold 750,000 o f CTTL shares<br />
in<br />
CFS market on behalf of its client Mr. Nadeem Ahmed Khan, member of the Group, despite<br />
that fact that Mr. Khan had no position in the ready market on that day. This activity suggests<br />
that CFS market was used by Nadeem Ahmed in collusion with the broker for generation of<br />
cash thus defeating the total rationale of the CFS market <strong>and</strong> its regulations.<br />
66
• On December 5, 2006 a payment of Rs.65 million was made to Mr. Naveed Haider Bukhari<br />
(Group member) on the written instructions of Mr. Ajmal Ansari, even though Mr. Ajmal<br />
Ansari had only Rs. 46.8 million credit balance in his account with Orix Investment Bank.<br />
• On December 5, 2006 a payment of Rs.85 million was made to Mr. Naveed Haider Bukhari<br />
•<br />
•<br />
•<br />
(Group member) on the written instructions of Mr. Asim Fayyaz Qureshi, even though Mr.<br />
of cheque<br />
received from Hoquani <strong>Securities</strong> Ltd on the instructions of its client Irfan Mehmood<br />
Imran Mehmood, CFO of CTTL) in the name of OIB<br />
however the cheques were returned.<br />
December 4, 2006 75m 7706204 01617014501<br />
SCB Karachi<br />
SCB Karachi<br />
• On December 4, 2006 through a Journal Voucher, entire credit ledger balance<br />
of Rs.7,888,419.16<br />
•<br />
Asim F. Qureshi had only Rs. 6 million credit balance in his account with Orix Investment Bank.<br />
On December 6, 2006 OIB credited account of Mr. Asim Fayyaz Qureshi by Rs.50m on account<br />
(Brother of CFO of CTTL).<br />
We came across two instances where cheques were issued by Mr. Irfan Mehmood (Brother of<br />
Following are details:<br />
Cheque date Rs. Number Bank Account<br />
Bank Name<br />
December 9, 2006 100m 7706207 01617014501<br />
In case of a client, Mr. Muhammad Ashraf Khan, we observed number of instances where debit<br />
balance of the client range between Rs.57m-68m.<br />
pertaining to client (Mr. Tariq Jawed) was transferred to Mr. Nadeem Ahmed Khan’s Account.<br />
It prima facie suggests that Mr. Tariq Jawed was trading on account of Mr. Nadeem Ahmed<br />
Khan <strong>and</strong> on Dec 4, 2006 the profits <strong>and</strong> balances were transferred to the real owner. It should<br />
be noted that Mr. Nadeem Ahmed Khan is a lawyer of CTTL <strong>and</strong> is an insider being aware of<br />
the unpublished price sensitive information relating to possible Saudi<br />
takeover <strong>and</strong> audit<br />
qualifications. A written instruction from Tariq Jawed was received by OIB instructing the<br />
Brokerage house to sell all CTTL shares in Tariq Jawed account <strong>and</strong> to transfer the entire sale<br />
proceeds to Mr. Nadeem Ahmed Khan’s Account.<br />
We noted instances were bulk quantity of CTTL shares were transacted through Client to Client<br />
transactions. Following are two instances:<br />
67
o On Nov 22, 2006, OIB on a/c of Mr. Muhammad Ajmal Ansari, sold 1,500,000 shares of<br />
CTTL to FNEL <strong>and</strong> others at the closing rate of Rs.69.15. FNEL was a major buyer in that<br />
Cto C transaction <strong>and</strong> quantity bought amounted to 1,275,000 shares. Please<br />
see<br />
Annexure 12<br />
o On Nov 24, 2006, OIB on a/c of Mr. Muhammad Ajmal Ansari, sold 1,885,000 shares of<br />
CTTL to FNEL, Bank of Khyber <strong>and</strong> others at the closing rate of Rs.76.20. FNEL <strong>and</strong> BOK<br />
were major buyer in that Cto C transaction <strong>and</strong> quantity bought amounted to 500,000<br />
shares <strong>and</strong> 1,000,000 shares respectively. BOK subsequently sold these shares through<br />
OIBin ready market on Dec 1, 2006 at Rs. 97.2 per share. Please see Annexure 14<br />
• A client Mr. Ashraf Khan had nominated Mr. Imran Mehmood, an active member of Group <strong>and</strong><br />
brother of Imran Mehmood, CFO. OIB, as admitted by its senior officials, was in knowledge of<br />
this relationship.<br />
An analysis of the pre-order session also revealed that bulk orders were entered through OIB in order<br />
to manipulate the share price, with a view to locking the price of the share at the upper circuit level.<br />
Following are instances:<br />
Order Buy/ Queued<br />
Date Time Client<br />
Order # Quantity Sale Price<br />
20061129 0944490003 AFQ 25173625 200,000.00 Buy 79.80<br />
20061129 0944500003 AFQ 25173639 200,000.00 Buy 79.80<br />
20061129 0944510007 AFQ 25173660<br />
200,000.00 Buy 79.80<br />
20061129 0944520001 AFQ 25173672<br />
200,000.00 Buy 79.80<br />
20061129 0944520023 AFQ 25173683 200,000.00 Buy 79.80<br />
20061129 0944530035 AFQ 25173706 200,000.00 Buy 79.80<br />
20061129<br />
0944540037 AFQ 25173726 200,000.00 Buy 79.80<br />
20061129<br />
0944450021 AFQ 25173568 200,000.00 Buy 79.80<br />
20061129<br />
0944470001 AFQ 25173589 200,000.00 Buy 79.80<br />
20061129<br />
0944480005 AFQ 25173608 200,000.00 Buy 79.80<br />
20061122<br />
0936170025 67 24490658 300,000.00 Buy 69.15<br />
20061122<br />
0936200009 67 24490685 300,000.00 Buy 69.15<br />
20061122<br />
0936220003 67 24490707 300,000.00 Buy 69.15<br />
20061122<br />
0936240009 67 24490728 100,000.00 Buy 69.15<br />
20061107<br />
0930000014 NL 23185409 50,000.00 Buy 54.90<br />
20061107<br />
0942080005 NL 23193069 50,000.00 Buy 54.90<br />
20061107 0942100007 NL 23193088<br />
50,000.00 Buy 54.90<br />
20061107 0942230015 NL 23193222<br />
50,000.00 Buy 54.60<br />
20061107 0942380005 NL 23193363 50,000.00 Buy 54.10<br />
68
Client code 67, AFQ <strong>and</strong> NL represent Abida Nasreen, Asim Fayyaz Qureshi <strong>and</strong> Nadeem Ahmed Khan<br />
respectively.<br />
The Managing Director of the Brokerage house Mr. Naeem Farooqui as well as Mr. Asif Hasan, COO, in<br />
their meeting with<br />
SECP, admitted that CFO of CTTL, Mr. Imran Mehmood approached MD Of the<br />
Brokerage house<br />
for opening of the CEO Mr. Ajmal Ansari’s Account along with some other persons<br />
account such as<br />
Mr. Muhammad Ashraf Khan <strong>and</strong> Mr. Asim Fayyaz Qureshi. The officials of the<br />
Brokerage house<br />
further informed that Mr. Asim Fayyaz Qureshi <strong>and</strong> Mr. Muhammad Ashraf Khan<br />
were also trading with First National Equities Limited. In addition they also informed that an another<br />
client, part of the Group, Mr. Irfan Mehmood (Brother of CFO of CTTL, Mr. Imran Mehmood) was also<br />
tradin g through First Pakistan <strong>Securities</strong> Limited. The Brokerage house officials also acknowledge<br />
receipt <strong>and</strong> payment of money to <strong>and</strong> from other persons not directly involved with the OIB<br />
CONCLUSION<br />
In view of the above, it appears that OIB was facilitating the Group of individuals by allowing them to<br />
take huge trading positions in the shares of CTTL, financing massive positions in CFS, frequent<br />
exchange of payments <strong>and</strong> shares on behalf of OIB clients between various brokers. It is also evident<br />
that OIB was aiding <strong>and</strong> abbeting Insider Trading by the Group including officials of CTTL as the same<br />
was in the knowledge of the bro kerage house.<br />
It is therefore concluded that OIB was in violation<br />
of code of conduct of the Brokers <strong>and</strong> Agents<br />
Registration Rules 2001.<br />
69
5.2. 2 Al-Hoqani <strong>Securities</strong> (AHS)<br />
Al-Hoqani <strong>Securities</strong><br />
Corp. (Pvt) Ltd also played a key role in aiding <strong>and</strong> abbeting insider trading <strong>and</strong><br />
market<br />
manipulation activities by the Group acting in concert. It has been found that a key member of<br />
the Group, Mr. Irfan Mehmood was operating through the Al-Hoqani <strong>Securities</strong> (AHS). A trader of Al-<br />
Hoqani <strong>Securities</strong>, Mr. Muhammad Hisar Ansari was operating through Foundation <strong>Securities</strong>. As per<br />
his written request all securities purchased were required to be transferred in the CDC account of Al-<br />
Hoqani <strong>Securities</strong> by Foundation <strong>Securities</strong>, <strong>and</strong> cheques for all sales proceeds were to be issued in the<br />
name of Al-Hoqani <strong>Securities</strong> by Foundation.<br />
While reviewing CDC activity in CTTL for Participant ID 06478 of M/s Al-Hoqani <strong>Securities</strong>, it<br />
revealed that a substantial quantity i.e., 11.5 million shares of CTTL were received from Investor a/c #<br />
39707 titled Ahmed Jamil Ansari (CEO of CTTL) on November 08, 2006. These shares were transferred<br />
to the sub-account of Mr. Irfan Mehmood (Brother of CFO of CTTL), a client of the brokerage house.<br />
The instance mentioned above, provided a major clue to the investigation <strong>and</strong> therefore we called up<br />
the Nominee Director of the Brokerage<br />
House to obtain a brief about the trading <strong>and</strong> related activities<br />
of its clients in the scrip of CTTL. Based on the briefing, we visited the brokerage house <strong>and</strong> obtained all<br />
documents pertaining to CDC movements for its client namely Irfan Mehmood identified as the biggest<br />
investor in the scrip. .<br />
Trading pattern of the brokerage house during the<br />
period under review is given hereunder:<br />
Date CFS Open CFS Open Ready Ready CFS CFS CFS Close CFS Close<br />
Buy Sale Buy Sale Release Release Buy Sale<br />
Financee Financier Buy Sale Financier Financee<br />
07-NOV-06 5,000 - 350,700 1,069,700 5,000 - 46,000 42,000<br />
08-NOV-06 42,000 46,000 241,000 231,000 - 46,000 139,400 100,000<br />
10-NOV-06 142,000 139,400 10,000 - - 41,400 40,900 -<br />
13-NOV-06 142,000 138,900 - 805,000 - 40,900 43,000 -<br />
14-NOV-06 142,000 141,000 955,100 141,200 - 30,400 30,400 -<br />
15-NOV-06 142,000 141,000 87,000 618,500 100,000 129,000 129,000 -<br />
16-NOV-06 42,000 141,000 - 1,579,800 - 137,500 137,500 -<br />
17-NOV-06 42,000 141,000 51,900 3,172,500 38,400 96,000 96,000 1,400<br />
20-NOV-06 5,000 141,000 2,500 100 - 21,300 21,300 1,100<br />
21-NOV-06 6,100 141,000 224,100 - - 19,700 19,700 -<br />
22-NOV-06 6,100 141,000 286,800 - - 20,200 20,200 59,000<br />
23-NOV-06 65,100 141,000 191,800 - - 5,500 105,500 -<br />
24-NOV-06 65,100 241,000 785,100 - - 76,000 76,000 -<br />
27-NOV-06 65,100 241,000 1,000 - - 75,000 75,000 -<br />
28-NOV-06 65,100 241,000 800,800 - - 90,900 90,900 -<br />
70
29-NOV-06 65,100 241,000 500,000 - - 111,900 111,900 -<br />
30-NOV-06 65,100 241,000 224,800 - - 148,400 258,000 -<br />
01-DEC-06 65,100 350,600 3,489,200 - 1,100 231,900 148,300 -<br />
04-DEC-06 64,000 267,000 2,770,000 170,000 64,000 13,400 6,400 1,500,000<br />
05-DEC-06 1,500,000 260,000 5,700 1,005,700 - 10,500 9,600 -<br />
06-DEC-06 1,500,000 259,100 257,300 3,280,300 - 9,600 9,600 50,000<br />
07-DEC-06 1,550,000 259,100 - - 50,000 6,100 6,100 -<br />
08-DEC-06 1,500,000 259,100 - - - 4,600 - -<br />
11,234,800 12,073,800<br />
As per R-17(a) of the Karachi Automated Trading System (KATS) Regulations of Karachi Stock<br />
<strong>Exchange</strong><br />
(Guarantee) Limited, “a member shall be responsible for all orders entered from his trading<br />
workstation(s)”. Further more as per code of conduct as prescribed in the Brokers <strong>and</strong> Agents<br />
Registration Rules 2001, Broker shall not create false market either singly or in concert with others or<br />
indulge in any act detrimental to the investor’s interest or which leads to interference with the fair <strong>and</strong><br />
smooth functioning of the market. However keeping in view the trading pattern as well as the<br />
documents received from the brokerage house during the period under review it transpires that:<br />
• Substantial quantity of buying <strong>and</strong> selling of CTTL shares was done through the brokerage house<br />
during the period under review, though it pertained to its client Mr. Irfan Mehmood, but<br />
significant portion of buying <strong>and</strong> selling cancelled each other out without change in beneficial<br />
ownership thus creating artificial activity in the market.<br />
• We have observed various transactions where Al-Hoqani <strong>Securities</strong> made payments to various<br />
<strong>and</strong><br />
received payments from<br />
the clients of other brokerage houses on account of persons, who were<br />
part of the G roup.<br />
• Major shareholders of CT TL transferred the ir shares to Al-Hoqani <strong>Securities</strong> for onward<br />
transfer to<br />
its client Mr. Irfan Mehmood. The share s were then sold in the market or used for<br />
generating<br />
further refinance under Repo arrange ments. All these arrangements were made through Al-<br />
Hoqani <strong>Securities</strong>. Some instances of these tran sfers are given hereunder: Date Incoming Shares From Quantity Date Outgoing share s to Quantity<br />
Jan 26, 2006 Yuba Jamil 400,000<br />
Dec 31, 2005 to date Sold in the market 13,864,850<br />
Oct 17, 2006 CDC I nv A/c Mohd.<br />
Ajmal Ansari<br />
435,000 Nov 11, 2006 Muhammad Ajmal<br />
Ansari<br />
2, 000,000<br />
Oct 17, 200 6 CDC Inv A/c Yuba Jamil 1, 900,000<br />
Nov 16, 2006 First Pak <strong>Securities</strong> 2, 000,000<br />
Nov 8, 200 6 CDC Inv A/c<br />
Jamil Ansari<br />
Ahmed<br />
11,500,000 Nov 28, 2006 Trust Leasing 1, 640,420<br />
71
Dec 12, 2005Various<br />
t ransfers<br />
to<br />
16,646,501 Nov 29, 2006 Naveed Bukhari 700, 000<br />
Nov 8, 2006<br />
Nov 30, 2006 Naveed Bukhari 1, 300,000<br />
Dec 5, 20 06 Shahid<br />
Sec.<br />
Ali Habib 1,000,000<br />
Dec 7, 200 6 Irfan<br />
(MNS)<br />
Mehmood 350, 000<br />
Dec 31, 2005 to date Various other<br />
transfers<br />
3,220,000<br />
• On December 6, 2006 Al-Hoqani <strong>Securities</strong> paid Rs.50 m to OIBLtd for credit to account of Mr. Asim<br />
Fayyaz Qureshi on the instructions of its client Irfan Mehmood (Brother of CFO of CTTL).<br />
• Mr. Naveed Haider Bukari paid a cheque dated Dec 4, 2006 amounting to Rs.25m to Al-Hoqani<br />
•<br />
<strong>Securities</strong>. Al Hoquani Sec credited the account of its client Irfan Mehmood to the extent of this<br />
amount, however the cheque was subsequently dishonoured. Cheque Number was 5749298 <strong>and</strong><br />
related to SCB-KHI.<br />
While reviewing Account opening form of Irfan Mehmood, initially Mr., Imran Mehmood was<br />
mentioned as the nominee. This was then crossed out <strong>and</strong> Mr. Kamran Mehmood’s name was<br />
inserted. Kamran Mehmood is brother of CTTL CFO.<br />
• An analysis of the pre-order session also revealed that bulk orders were entered through the<br />
brokerage house in order to lock the price of the share at the upper circuit level <strong>and</strong> lower circuit<br />
level on respective days.<br />
Following are instances:<br />
Date<br />
Time Client Order # Order Quantity<br />
Buy/<br />
Sale<br />
Queued<br />
Price<br />
20061204 0930110141 003 25526822 200,000.00 Buy 102.05<br />
20061204 0930030033 003 25526469 200,000.00 Buy 102.05<br />
20061204 0930040031 003 25526545 200,000.00 Buy<br />
102.05<br />
20061204 0930050017 003 25526613 200,000.00 Buy<br />
102.05<br />
20061204 0930090011 003 25526657 200,000.00 Buy 102.05<br />
20061204 0930130095 003 25526984 100,000.00 Buy 102.05<br />
20061204 0930000004 003 25526351 200,000.00 Buy 102. 05<br />
20061204 0930020045<br />
003 25526392<br />
200,000.00<br />
Buy 102.05<br />
20061201 0915000008<br />
003 25403441<br />
200,000.00<br />
Buy 97.20<br />
20061201 0915140025 003<br />
25403784 200,000.00 Buy<br />
97.20<br />
20061201 0915160041 003 25403872 200,000.00 Buy 97.20 20061201 0915060009<br />
003 25403635<br />
200,000.00<br />
Buy<br />
97.20<br />
2 0061201 0915070001<br />
003 25403638<br />
200,000.00 Buy<br />
97.20<br />
20061201 0915070013 003 25403644 200,000.00 Buy 97.20<br />
72
20061201 0915100001<br />
003 25403659 200,000.0 0 Buy 97.20<br />
20061201 0915100007 003 25403662 200,000.00 Buy 97.20<br />
20061201 0915110007<br />
003 25403667 200,000.00 Buy 97.20<br />
20061201 0915150007<br />
003 25403813 200,000.00 Buy 97.20<br />
20061130 0930020049 003 25285648 200,000.00 Buy<br />
92.60<br />
20061130 0930040035 003 25285739 200,000.00<br />
Buy 92.60<br />
20061130 0930000020 003 25285550<br />
200,000.00 Buy 92.60<br />
20061130 0930010093 003 25285623 200,000.00 Buy<br />
92.60<br />
20061130 0930030057 003 25285697 200,000.00 Buy 92.60<br />
20061130 0930070009 003 25285851 200,000.00 Buy<br />
92.60<br />
20061130 0930090079 003 25285940<br />
200,000.00 Buy 92.60<br />
20061130 0930090011 003 25285906<br />
200,000.00 Buy 92.60<br />
20061130 0930080033 003 25285873 200,000.00 Buy<br />
92.60<br />
20061130 0930100057 003 25285972 200,000.00 Buy 92.60<br />
20061129 0930590007 003 25164900 250,000.00 Buy 88.20<br />
20061128 0930150075 003 25043302 250,000.00 Buy 84.00<br />
20061128 0930150075 003 25043302 250,000.00 Buy 84.00<br />
20061128 0930220063 003 25043761 250,000.00 Buy 84.00<br />
20061128 0930190059 003 25043610 250,000.00 Buy 84.00<br />
20061128 0930230035 003 25043793 250,000.00 Buy 84.00<br />
20061128 0930200029 003 25043651 250,000.00 Buy 84.00<br />
20061128 0930160049 003 25043368 250,000.00 Buy 84.00<br />
20061128 0930130125<br />
003 25043177 250,000.00 Buy 84.00<br />
20061128 0930170021<br />
003 25043434 250,000.00 Buy 84.00<br />
20061128 0930170139 003 25043493 250,000.00 Buy 84.00<br />
20061128 0930180103 003 25043553 250,000.00 Buy 84.00<br />
20061128 0930210009 003 25043687 250,000.00 Buy 84.00<br />
20061128 0930210085 003 25043725<br />
250,000.00 Buy 84.00<br />
20061127 0930480031 003 24924459<br />
300,000.00 Buy 80.00<br />
20061127 0930500013 003 24924482 300,000.00 Buy<br />
80.00<br />
20061127 0930510007 003 24924499 300,000.00 Buy 80.00<br />
20061127 0930510031 003 24924511 300,000.00 Buy 80.00<br />
20061127 0930520021 003 24924522 300,000.00 Buy<br />
80.00<br />
20061127 0930530017 003 24924533<br />
300,000.00 Buy 80.00<br />
20061127 0930540025 003 24924551 300,000.00 Buy 80.00<br />
20061127 093 0550011 003 24924569 300,000.00 Buy<br />
80.00<br />
20061127 0930560011 003 24924585 300,000.00<br />
Buy<br />
80.00<br />
20061127 0930570001 003 24924595 300,000.00 Buy<br />
80.00<br />
20061124 0915000010 003 24755097 250,000.00 Buy<br />
76.20<br />
20061124 0915010077 003 24755162 250,000.00 Buy<br />
76.20<br />
20061124 0915020019 003 24755178 250,000.00 Buy<br />
76.20<br />
20061124 0915030043 003 24755216 250,000.00 Buy<br />
76.20<br />
20061124 0915040025 003 24755253 250,000.00 Buy<br />
76.20<br />
20061124 0915140063 003 24755621 250,000.00 Buy<br />
76.20<br />
20061124 0915160111 003 24755795 250,000.00 Buy<br />
76.20<br />
20061124 0915210033 003 24756081 250,000.00 Buy<br />
76.20<br />
20061123 0936590025 003 24610638 300,000.00 Buy 72.60<br />
20061123 0937030009 003 24610673 300,000.00 Buy 72.60<br />
20061123 0937040007 003 24610685 300,000.00 Buy 72.60<br />
20061123 0937050011 003 24610693 300,000.00 Buy 72.60<br />
73
20061123 0937060009 003 24610702 300,000.00 Buy 72.60<br />
20061123 0937080003 003 24610718 300,000.00 Buy 72.60<br />
20061123 0937090001 003 24610733 300,000.00 Buy 72.60<br />
20061123 0937100021 003 24610757 300,000.00 Buy 72.60<br />
20061121 0930110115 003 24345524 250,000.00 Buy 65.90<br />
20061121 0930060005 003 24345161 250,000.00 Buy 65.90<br />
20061121 0930060039 003 24345178 250,000.00 Buy 65.90<br />
20061121 0930070035 003 24345212 250,000.00 Buy 65.90<br />
20061121 0930080019 003 24345258 250,000.00 Buy 65.90<br />
20061121 0930000012 003 24345005 250,000.00 Buy 65.90<br />
20061121 0930020059 003 24345099 250,000.00 Buy 65.90<br />
20061121 0930030011 003 24345110 250,000.00 Buy 65.90<br />
20061121 0930030038 003 24345123 250,000.00 Buy 65.90<br />
20061121 0930040027 003 24345137 250,000.00 Buy 65.90<br />
20061121 0930050005 003 24345146 250,000.00 Buy 65.90<br />
20061121 0930010013 003 24345063 250,000.00 Buy 65.90<br />
20061117 0941110023 003 24086349 250,000.00 Buy 58.90<br />
• A trader named Mr. Hisar Ansari at Al-Hoqani <strong>Securities</strong> was involved in trading in CTTL shares<br />
through Foundation <strong>Securities</strong>. Mr. Hisar Ansari’s father name is Abdul Latif <strong>and</strong> is resident of K-<br />
771, K Area Korangi, Karachi. As per his account openi ng form his occupation is service <strong>and</strong> has<br />
not designated any nominee. We noted that Mr. Hisar Ansari had given a written st<strong>and</strong>ing<br />
instructions d ated March 30, 2006 to Foundation <strong>Securities</strong> relating to his trading account contents<br />
of which are given hereunder: Quote-“Kindly transfer all shares to CDC Participant ID 0 6478 of Al-Hoqani Sec as <strong>and</strong><br />
wh en I purchase thr ough you. Kindly always issu e cheque in favor of Al-Hoqani Sec as<br />
<strong>and</strong><br />
wh en I sale through you.” Unquote.<br />
Additionally while reviewing record s received from Foundation <strong>Securities</strong>, we noted following<br />
cheques were issued by Foundation <strong>Securities</strong> to Al-Hoqani <strong>Securities</strong> on account of trading of<br />
Hisar Ansa ri, details of which is g iven hereunder:<br />
Account tile Amount Cheque date Cheque Number Remarks if any<br />
Al-Hoqani <strong>Securities</strong> Rs.22,303,244 Dec 4, 2006 824617<br />
MCB Cutting observed on the cheque as<br />
initially account title was<br />
Muhammad Hisar Ansari<br />
Al-Hoqani <strong>Securities</strong> Rs.12 3,814,003 Dec 6, 2006 824 629 MCB<br />
Following are some payment made by Al-Hoqani <strong>Securities</strong> to Foundation<br />
<strong>Securities</strong>:<br />
Account tile<br />
Amount Cheque date Cheque Number Remarks if any<br />
Foundation <strong>Securities</strong> Rs. 1,056,685 Nov 15, 2006 531382 MCB K SE<br />
Foundation <strong>Securities</strong> Rs.400,328 Nov 23, 2006 17655246 PICIC K SE<br />
74
Foundation <strong>Securities</strong> Rs. 705,740 Nov 22, 2006 531394 MCB K SE<br />
Foundation <strong>Securities</strong> Rs. 298,959 Nov 24, 2006 531392 MCB K SE<br />
Foundation <strong>Securities</strong> Rs. 404,095 Nov 27, 2006 531397 MCB K SE<br />
Foundation <strong>Securities</strong> Rs.526,380 Nov 29, 2006 17655269 PICIC K SE<br />
Foundation <strong>Securities</strong> Rs.924,562 Dec 4, 2006 17655284 PICIC K SE<br />
Abo ve trading by Mr. Hisar Ansari <strong>and</strong> involvement<br />
of Al-Hoqani <strong>Securities</strong> in receipts <strong>and</strong> payments<br />
raised concerns that Al-Hoqani <strong>Securities</strong> might be involved in propri etary trading. When Chief<br />
Exec utive was questioned ba sed on above evidence, he informed that M r. Hisar’s trading has nothing<br />
to do with Al-Hoqani Securi ties, infact<br />
Mr. Hisar Ansari was trading on the instructions of Mr. Irfan<br />
Mehmood, a client of Al-Hoqani <strong>Securities</strong> <strong>and</strong> part of Group. On our inquiry regarding receipts <strong>and</strong><br />
payment of cheques on accou nt of Mr. Hisar Ansari, CEO of Al-Hoqani<br />
informed us that all receipts<br />
<strong>and</strong> payments, whenever received, w ere instantaneously debited/ cred ited to IM’s Accoun t. The CEO<br />
of Al-Hoqani <strong>Securities</strong> agreed to provide us evidence in support of the claim.<br />
Subsequently<br />
on January 16, 2007, the Brokerage House provided the following written statement:<br />
“This<br />
is to confirm you that our trader Mr. Muhammad Hisar Ansari have sold 1,250,000 shares of Callmate<br />
Telips<br />
Telecom through M/s Foundation <strong>Securities</strong> (Pvt) Limited on instruction of Mr. Irfan Mehmood on<br />
December<br />
1, 2006. Please also note that proceeds from these sales have been transferred to Mr. Irfan Mehmood<br />
account<br />
maintained with us. “<br />
The owner of AHS has an account with First Capital Equities Limited <strong>and</strong> during the period under<br />
review Mr. Suleman Ahmed Saeed Al-Hoqani has<br />
traded extensively in CTTL shares.<br />
The<br />
above facts prove that Al-Hoqani <strong>Securities</strong> was not ignorant of the insider trading <strong>and</strong><br />
manipulative practices being undertaken by its client Irfan<br />
Mehmood, a member of Group.<br />
CONCLUSION<br />
In view of the above, it is evident that Al-Hoqani <strong>Securities</strong> was facilitating Irfan Mehmood by allowing<br />
him to take huge trading positions in the shares of CTTL, frequent exchange of payments on behalf of<br />
clients of various brokers <strong>and</strong> transfer of shares in CDC.<br />
It is therefore concluded that the Brokerage House has been in violation of R -12 of code of conduct<br />
of<br />
Brokers <strong>and</strong> Agents Registration Rules 2 001.<br />
75
5.2.3 First National Equities (FNEL)<br />
First National Equities (FNEL) was also used by the Group for insid er trading <strong>and</strong> market<br />
manipulation activities. Asi m Fayyaz Qureshi <strong>and</strong> Muham mad Ashraf Khan, key members of Group,<br />
opened<br />
their accounts on Nov 11, 2006 <strong>and</strong> Oct 12, 2006 respectively. First Pakistan <strong>Securities</strong> Limited, a<br />
member firm of Lahore Stock <strong>Exchange</strong> <strong>and</strong> related party to the FNEL also traded actively in the CTTL<br />
scrip.<br />
Trading pattern of the brokerage house during the period under review is given hereunder:<br />
Date CFS<br />
Open Buy<br />
CFS Open<br />
Sale<br />
Ready<br />
Buy<br />
Ready<br />
Sale<br />
CFS<br />
Release<br />
Buy<br />
CFS<br />
Release<br />
Sale<br />
CFS<br />
Close<br />
Buy<br />
CFS Close<br />
Sale<br />
07-NOV-06 11,700 200 117,700 135,200 11,700 200 - 27,900<br />
08-NOV-06 27,900 - 165,600 174,100 27,900 - - 60,800<br />
10-NOV-06 60,800 - 30,000 62,100 60,800 - - 37,000<br />
13-NOV-06 37,000 - 1,539,500 60,300 37,000 - 1,308,300 1,576,500<br />
14-NOV-06 1,576,500 1,308,300 73,900 167,700 148,700 108,100 26,000 222,500<br />
15-NOV-06 1,650,300 1,226,200 89,600 80,300 197,500 - 636,300 286,800<br />
16-NOV-06 1,739,600 1,862,500 634,500 375,400 283,800 606,700 36,500 505,900<br />
17-NOV-06 1,961,700 1,292,300 5,925,700 846,000 508,900 56,500 84,000 5,762,700<br />
20-NOV-06 7,240,400 1,344,700 33,400 1,500 312,200 - - 341,700<br />
21-NOV-06 7,269,900 1,344,700 4,600 1,000 419,000 24,900 702,200 382,900<br />
22-NOV-06 7,233,800 2,022,000 105,100 58,700 378,700 662,600 480,000 483,800<br />
23-NOV-06 7,338,900 1,839,400 372,900 13,100 343,900 172,300 397,000 716,800<br />
24-NOV-06 7,711,800 2,064,100 340,700 42,000 1,042,000 78,000 1,181,700 1,382,600<br />
27-NOV-06 8,052,400 3,167,800 104,000 17,600 1,960,600 281,600 1,328,000 2,064,600<br />
28-NOV-06 8,156,400 4,214,200 3,821,800 145,000 1,466,600 193,100 1,502,500 5,288,100<br />
29-NOV-06 11,977,900 5,523,600 2,406,600 1,174,100 1,968,300 529,000 291,200 3,905,600<br />
30-NOV-06 13,915,200 5,285,800 2,651,300 163,400 7,242,000 3,567,300 2,473,500 8,865,500<br />
01-DEC-06 15,538,700 4,192,000 5,789,300 1,419,300 1,775,700 130,700 2,600,000 5,553,800<br />
04-DEC-06 19,316,800 6,661,300 44,800 4,215,100 5,057,800 915,600 544,800 619,300<br />
05-DEC-06 14,878,300 6,290,500 421,000 2,098,800 4,435,600 2,533,900 1,319,300 2,273,900<br />
06-DEC-06 12,716,600 5,075,900 120,100 142,200 1,044,600 124,700 975,000 1,055,300<br />
07-DEC-06 12,727,300 5,926,200 35,400 26,100 307,700 465,600 - 343,600<br />
08-DEC-06 12,763,200 5,460,600 1,800 14,500 100,000 3,300 - -<br />
24,829,300 11,433,500<br />
As per R-17(a) of the Karachi Automated Trading System (KATS) Regulations of the Karachi Stock<br />
<strong>Exchange</strong> (Guarantee) Limited, “a member shall be responsible for all orders entered from his trading<br />
workstation(s). Further more as per code of conduct as prescribed in the Brokers <strong>and</strong> Agents<br />
Registration Rules 2001, Broker shall not create false market either singly or in concert with others or<br />
indulge in any act detrimental to the investor’s<br />
interest or which leads to interference with the fair <strong>and</strong><br />
76
smooth functioning of the market. However keeping in view the trading pattern as well as the<br />
documents received FNEL during the period under review it transpires that:<br />
• Substantial quantity of buying <strong>and</strong> selling of CTTL shares was conducted through the brokerage<br />
house (Refer Nov 20, 21, 22, 23, 24, 27, 28, 29, 30, <strong>and</strong> Dec 1, 2006) at the same or almost at the same<br />
rate which shows that false impression of active trading in the scrip was being created.<br />
• We have observed<br />
various transactions where First National Equities made payment to clients <strong>and</strong><br />
received payments from clients of other brokerage houses directly.<br />
• We fu rther noted various instances<br />
where<br />
the brokerage<br />
house<br />
pu t bulk quantity of orders in the<br />
pre-open trading session to influence<br />
the market price<br />
of the CTTL.<br />
Following<br />
are instances:<br />
Order<br />
Queu ed<br />
Date Time Client Order # Quantity<br />
Price<br />
20061207 0930030 153 487 25914563 250,000.00 87 .50<br />
20061207 0930040023 487<br />
25914585 250,000.00<br />
87 .50<br />
20061207 0930050019<br />
487<br />
25914598 250, 000.00 87.50<br />
2006120 7 0930000056 487 25914252 250, 000.00 87 .50<br />
2006120 7 0930080043<br />
487 25914658 250,000.00 87.50<br />
20061207 0930020165 487 25914464 250,000.00 87.50<br />
20061207 0930060033 IP 25914620 250,000.00 87.50<br />
20061207 0930000030 IP 25914239 250,000.00 87.50<br />
20061207 0930000032 IP 25914240 250,000.00 87.50<br />
20061207 0930000052 IP 25914250 250,000.00 87.50<br />
20061207 0930000058 IP 25914253 250,000.00 87.50<br />
20061207 0930000062 IP 25914255 250,000.00 87.50<br />
20061207 0930030017 IP 25914495 250,000.00 87.50<br />
20061207 0930030049 IP 25914511 250,000.00 87.50<br />
20061207 0930060019 FP 25914613 200,000.00 87.50<br />
20061207 0930070017 FP 25914629 200,000.00 87.50<br />
20061207 0930040015 FP 25914581 200,000.00 87.50<br />
20061207 0930050017 FP 25914597 200,000.00 87.50<br />
20061207 0930000022 FP 25914235 200,000.00 87.50<br />
20061207 0930180017 FP 25915324 200,000.00 87.50<br />
20061207 0930010101 FP 25914346 200,000.00 87.50<br />
20061207 0930020109 FP 25914436 200,000.00 87.50<br />
20061207 0930160031 FP 25915170 200,000.00 87.50<br />
20061207 0930030109 FP 25914541 200,000.00 87.50<br />
20061204 0930200089 FP 25527162 100,000.00 102.05<br />
20061204 0930220051 FP 25527265 200,000.00 102.05<br />
20061204 0930250001 FP 25527273 200,000.00 102.05<br />
20061204 0930270001 FP 25527279 100,000.00 102.05<br />
20061204 0930040115 FP 25526587 200,000.00 102.05<br />
20061204 0930080003 FP 25526651 200,000.00 102.05<br />
20061204 0933420003 FP 25528067 200,000.00 102.05<br />
20061204 0930150003 FP 25526992 200,000.00 102.05<br />
20061204 0930180001 FP 25527004 200,000.00 102.05<br />
77
20061204 0933440007 FP 25528079 200,000.00 102.05<br />
20061204 0930100144 FP 25526730 100,000.00 102.05<br />
20061204 0933580005 FP 25528146 100,000.00 102.05<br />
20061201 0915250005 0525 25404028 200,000.00 97.20<br />
20061201 0915000016 0525 25403445 200,000.00 97.20<br />
20061201 0915010093 0525 25403517 200,000.00 97.20<br />
20061201 0915040021 0525 25403621 200,000.00 97.20<br />
20061201 0915050007 0525 25403627 200,000.00 97.20<br />
20061201 0915060013 0525 25403637 200,000.00 97.20<br />
20061201 0915080005 0525 25403648 200,000.00 97.20<br />
20061201 0915030001 0525 25403567 200,000.00 97.20<br />
20061201 0915140009 FP 25403776 200,000.00 97.20<br />
20061201 0916510021 FP 25404610 200,000.00 97.20<br />
20061201 0916520007 FP 25404614 200,000.00 97.20<br />
20061201 0916530013 FP 25404623 200,000.00 97.20<br />
20061201 0916540013 FP 25404630 200,000.00 97.20<br />
20061201 0915150045 FP 25403832 200,000.00 97.20<br />
20061201 0916500001 FP 25404594 200,000.00 97.20<br />
20061201 0915280001 P190 25404040 200,000.00 97.20<br />
20061201 0915260005 P190 25404035 200,000.00 97.20<br />
20061201 0915000036 P190 25403455 200,000.00 97.20<br />
20061201 0915000044 P190 25403459 200,000.00 97.20<br />
20061201 0915030069 P190 25403601 200,000.00 97.20<br />
20061130 0934490005 0525 25289189 200,000.00 92.60<br />
20061130 0934510015 0525 25289216 200,000.00 92.60<br />
20061130 0934540017 0525 25289242 200,000.00 92.60<br />
20061130 0934570011 0525 25289276 200,000.00 92.60<br />
20061130 0935010003 0525 25289303 200,000.00 92.60<br />
20061130 0930030005 FP 25285671 200,000.00 92.60<br />
20061130 0930050023 FP 25285777 200,000.00 92.60<br />
20061130 0930000030 FP 25285555 200,000.00 92.60<br />
20061130 0930150103 FP 25286277 200,000.00 92.60<br />
20061130 0930010091 FP 25285622 200,000.00 92.60<br />
20061130 0930040009 FP 25285726 200,000.00 92.60<br />
20061130 0930060037 FP 25285830 200,000.00 92.60<br />
20061130 0930070001 FP 25285847 200,000.00 92.60<br />
20061130 0930080003 FP 25285858 200,000.00 92.60<br />
20061130 0930190043 FP 25286519 125,000.00 92.60<br />
20061129 0944520027 AN 25173685 300,000.00 80.00<br />
20061129 0944570021 AN 25173769 300,000.00 81.00<br />
20061127 0931420009 FP 24925410 300,000.00 80.00<br />
20061127 0931430023 FP 24925436 300,000.00 80.00<br />
20061127 0931480015 FP 24925513 300,000.00 80.00<br />
20061127 0931490023 FP 24925539 300,000.00 80.00<br />
20061127 0931500027 FP 24925556 300,000.00 80.00<br />
20061127 0931510021 FP 24925574 300,000.00 80.00<br />
20061127 0931580031 FP 24925683 300,000.00 80.00<br />
20061127 0932010015 FP 24925725 100,000.00 80.00<br />
20061127 0930000014 P190 24922810 250,000.00 80.00<br />
20061127 0930000024 P190 24922815 300,000.00 80.00<br />
78
20061127 0930000046 P190 24922826 250,000.00 80.00<br />
20061124 0925500005 810500 24761282 200,000.00 76.20<br />
20061124 0926020005 810500 24761405 200,000.00 76.20<br />
20061124 0915020035 FP 24755186 300,000.00 76.20<br />
20061124 0915040013 FP 24755247 300,000.00 76.20<br />
20061124 0915100003 FP 24755364 300,000.00 76.20<br />
20061124 0915110037 FP 24755410 300,000.00 76.20<br />
20061124 0916550001 FP 24757054 300,000.00 76.20<br />
20061124 0916570001 FP 24757069 300,000.00 76.20<br />
20061124 0917150001 FP 24757209 300,000.00 76.20<br />
20061124 0917170013 FP 24757226 300,000.00 76.20<br />
• While reviewing Account Opening form of Asim Fayyaz Qureshi, we observed that he has<br />
nominated Mr. Muhammad Ashraf Khan, another client of FNEL <strong>and</strong> an active member of<br />
Group. This proves that these persons are connected <strong>and</strong> that FNEL was also in the knowledge.<br />
• Instances were noted where trading was allowed to FNEL clients even though the client had<br />
huge debit balances. For instances in case of Muhammad Ashraf Khan debit balance went upto<br />
Rs.72 m on Nov 13, 2006. Like wise in case of First Pakistan <strong>Securities</strong> Ltd (FPSL) debit balances<br />
amounted to Rs.318m on Nov 23, 2006.<br />
• While reviewing account opening form of FPSL following information regarding the client was<br />
noted:<br />
o Details as per the account opening form<br />
i. Mr. Saeed Ahmed Bajwa CEO<br />
ii. Mr. Waqas Usmani COO<br />
iii. Mr. Naveed Ishaque Head of Operations<br />
o As per the Memor<strong>and</strong>um of Association of FPSL following persons are subscriber to<br />
the Memor<strong>and</strong>um<br />
- Mrs. Adeela Ali w/o Ali A. Malik<br />
- Mr. Iftikhar Ahmed Kirmani s/o Syed Fazal Shah Kirmani<br />
It should be noted that when FPSL was asked to provide information about trading in CTTL during<br />
the period under review, we were informed that almost all trading by FPSL through FNE relates to<br />
their client Mr. Irfan Mehmood. However while reviewing FNEL ledger of FPSL, FPSL instructed<br />
79
FNEL on November 6, 2006 to issue cheque of Rs. 104.4 million in favor of Faysal Bank Limited for<br />
credit of FPSL account with the bank, as informed by FNEL.<br />
• Mr. Irfan Mehmood paid a cheque amount of Rs. 80 million to FNEL for credit of FNEL Client Mr.<br />
Asim Fayyaz Qureshi. Cheque number was 7706205 dated December 4, 2006 pertaining to SCB-<br />
KCH. The cheque was dishonoured subsequently. It should be noted that Irfan Mehmood is not a<br />
client of FNEL, but is a key member of Group.<br />
• On Dec 5, 2006 Mr. Irfan Mehmood paid a cheque to FNEL for Rs. 80 million against debit balance<br />
of First Pakistan <strong>Securities</strong> Limited at FNEL. The cheque was dishonoured subsequently.<br />
• On the written instructions of FPSL, who is a client of Orix Investment Bank, OIBissued the<br />
following cheques:<br />
Cheque<br />
Number<br />
Cheque date Amount Beneficiary Payer On account of<br />
576474 MCB Dec 1, 2006 100,753,920 FNEL for A/c Orix Investment Sale of 1,200,000<br />
KSE<br />
of FPSL Bank<br />
CTTL shares<br />
438008 MCB<br />
KSE<br />
Dec 12, 2006 53,222,426 FNEL for A/c<br />
of FPSL<br />
Orix Investment Sale of 575,000<br />
Bank<br />
CTTL shares<br />
• FNEL made an arrangement with Muhammad Ashraf Khan, (key member of Group <strong>and</strong> joint client<br />
of OIB<strong>and</strong> FNEL) whereby financing was provided against 2,000,000 CTTL shares at Rs.50/-.<br />
Details are given hereunder:<br />
o On October 10, 2006 out of 2m shares, 942,000 shares were transferred to FNEL. On Oct 16,<br />
2006 OIB received Rs.47,145,000 against above shares.<br />
o On October 18, 2006 out of 2m shares, 1,057,100 shares were transferred to FNEL. On Nov<br />
13, 2006 OIB received Rs.52,855,000 against above shares.<br />
• We noted instances of bulk quantity Client to Client transactions <strong>and</strong> Member to Member<br />
transactions through the brokerage house. Following are two instances:<br />
o On Nov 22, 2006 through Orix Investment Bank, Mr. Muhammad Ajmal Ansari sold<br />
1,500,000 shares of CTTL to FNEL <strong>and</strong> others at the rate of Rs.69.15. FNEL was a major buyer<br />
in that Cto C transaction <strong>and</strong> quantity bought amounted to 1,275,000 shares.<br />
o On Nov 24, 2006 through Orix Investment Bank, Mr. Muhammad Ajmal Ansari sold<br />
1,885,000 shares of CTTL to FNEL, Bank of Khyber <strong>and</strong> others at the rate of Rs.76.20. FNEL<br />
80
CONCLUSION<br />
<strong>and</strong> BOK were major buyer in that C to C transaction <strong>and</strong> quantity bought amounted to<br />
500,000 shares <strong>and</strong> 1,000,000 shares respectively.<br />
In view of the above, it appears that First National Equities was facilitating the Group by allowing them<br />
to take huge trading positions in the shares of CTTL, frequent exchange of payments on behalf of the<br />
clients between various brokers <strong>and</strong> transfer of shares in CDC. FNEL was actively assisting its clients to<br />
manipulate the price in pre-open sessions.<br />
It is therefore concluded that the Brokerage House was in violation of of the R-12 of code of the conduct<br />
of the Brokers <strong>and</strong> Agents Registration Rules 2001.<br />
81
5.2.4 Shahihd Ali Habib <strong>Securities</strong> (SAHS)<br />
The Brokerage house has two clients who traded in CTTL. Mr. Junaid Habib bought 1.5m shares of<br />
CTTL on Dec 5, 2006 <strong>and</strong> the same were financed through CFS on the same day. Whereas another client<br />
Mr. Naveed Haider Bukhari bought 574,500 shares on Dec 1, 2006 <strong>and</strong> 6,000,000 shares on Dec 4, 2006.<br />
Trading pattern of the brokerage house during the period under review is given hereunder:<br />
CFS<br />
Release<br />
Buy<br />
CFS<br />
Release<br />
Sale<br />
CFS<br />
Close<br />
Buy<br />
CFS<br />
Close<br />
Sale<br />
CFS Open CFS Open Ready Ready<br />
Date Buy Sale Buy Sale<br />
07-NOV-06 - - 21,500 64,500 - - - 6,000<br />
08-NOV-06 6,000 - 14,200 19,200 6,000 - - 1,000<br />
10-NOV-06 1,000 - 1,500 1,000 - - - -<br />
13-NOV-06 1,000 - 16,100 11,100 - - - 9,000<br />
14-NOV-06 10,000 - 6,500 12,500 6,000 - - -<br />
15-NOV-06 4,000 - 11,200 8,200 - - - 4,000<br />
16-NOV-06 8,000 - 26,500 41,500 4,000 - - 8,000<br />
17-NOV-06 12,000 - 38,000 46,100 8,000 - - -<br />
20-NOV-06 4,000 - 100 - - - - 100<br />
21-NOV-06 4,100 - 200 100 - - - -<br />
22-NOV-06 4,100 - 5,600 - - - - 5,600<br />
23-NOV-06 9,700 - - - - - - -<br />
24-NOV-06 9,700 - 1,000 - - - - -<br />
27-NOV-06 9,700 - 300 - - - - 100<br />
28-NOV-06 9,800 - 6,000 - - - - 6,000<br />
29-NOV-06 15,800 - 1,000 12,000 10,700 - - -<br />
30-NOV-06 5,100 - 43,000 1,000,000 - - - 43,000<br />
01-DEC-06 48,100 - 595,500 71,500 48,000 - - 574,500<br />
04-DEC-06 574,600 - 6,021,700 10,800 100 - - 6,011,000<br />
05-DEC-06 6,585,500 - 1,563,000 4,000 - - - 1,559,000<br />
06-DEC-06 8,144,500 - 9,500 35,500 37,600 - - 11,600<br />
07-DEC-06 8,118,500 - - - 1,500,000 - - -<br />
08-DEC-06 6,618,500 - - 1,300 - - - -<br />
8,382,400 1,339,300<br />
We also noted that a cheque dated Dec 6, 2006 amounting Rs.80m paid by Naveed Haider Bukhari from<br />
his own account was dishonoured.<br />
Few instances were also noted where buying <strong>and</strong> selling at the same rate on the same day, though<br />
comprising little volume, occurred.<br />
82
CONCLUSION:<br />
We have not found any conclusive evidence to suggest that the brokerage house was in violation of the<br />
R-12 of code of the conduct of the Brokers <strong>and</strong> Agents Registration Rules 2001.<br />
83
5.2.5 Noman Abid & Company (NA)<br />
Trading pattern of the brokerage house during the period under review is given hereunder:<br />
CFS Open CFS Open Ready Ready CFS Release CFS Release CFS Close CFS Close<br />
Date Buy Sale Buy Sale Buy Sale Buy Sale<br />
07-NOV-06 - - - 3,000 - - - -<br />
08-NOV-06 - - - 3,500 - - - -<br />
10-NOV-06 - - 500 - - - - 500<br />
13-NOV-06 500 - - - 500 - - -<br />
14-NOV-06 - - 69,500 14,000 - - - -<br />
15-NOV-06 - - - 15,000 - - - -<br />
22-NOV-06 - - - 1,200 - - - -<br />
23-NOV-06 - - - 2,500 - - - -<br />
24-NOV-06 - - - 500 - - - -<br />
28-NOV-06 - - - 2,000 - - - -<br />
29-NOV-06 - - - 44,000 - - 375,000 -<br />
30-NOV-06 - 375,000 - 2,000 - 289,000 15,400 -<br />
01-DEC-06 - 101,400 1,000 3,100 - 31,400 30,700 -<br />
04-DEC-06 - 100,700 1,000,000 1,400 - 30,700 30,700 1,000,000<br />
05-DEC-06 1,000,000 100,700 502,300 - 1,000,000 99,700 1,599,300 1,502,300<br />
06-DEC-06 1,502,300 1,600,300 300 200 500,000 523,600 373,600 500,100<br />
07-DEC-06 1,502,400 1,450,300 - - - 22,000 18,000 -<br />
08-DEC-06 1,502,400 1,446,300 - 7,800 244,300 253,900 - -<br />
1,573,600 100,200<br />
Brokers <strong>and</strong> Agents Registration Rules, 2001- R-13 Brokers to abide by code of conduct<br />
We have observed an instance where Noman Abid & Co. received payment amounting Rs. 5 million<br />
from Mr. Irfan Mehmood (Brother of CFO of CTTL), for account of Naveed Haider Bukhari on Dec 7,<br />
2006. IM is an active member of Group.<br />
An active member of the Group Mr. Naved Haider Bukhari was also trading through the brokerage<br />
house. It appears that Insider Trading being done by the Group was in the knowledge of NA.<br />
CONCLUSION<br />
We have not found any conclusive evidence to suggest that the NA was in violation of the R-12 of code<br />
of the conduct of the Brokers <strong>and</strong> Agents Registration Rules 2001.<br />
84
5.2.6 First Capital Equities Limited (FCEL)<br />
Trading pattern of the brokerage house during the period under review is given hereunder:<br />
CFS<br />
Release<br />
Buy<br />
CFS<br />
Release<br />
Sale<br />
CFS<br />
Close<br />
Buy<br />
CFS<br />
Close<br />
Sale<br />
CFS Open CFS Open Ready<br />
Date Buy Sale Buy Ready Sale<br />
07-NOV-06 64,000 - 197,000 78,100 64,000 - - 152,500<br />
08-NOV-06 152,500 - 82,600 48,200 152,500 - - 190,000<br />
10-NOV-06 190,000 - 25,200 19,700 190,000 - - 189,000<br />
13-NOV-06 189,000 - 157,500 69,200 189,000 - - 282,000<br />
14-NOV-06 282,000 - 177,300 17,900 282,000 - - 441,100<br />
15-NOV-06 441,100 - 105,100 187,600 441,100 - - 366,100<br />
16-NOV-06 366,100 - 225,800 136,200 366,100 - - 495,400<br />
17-NOV-06 495,400 - 134,800 360,700 495,400 - - 304,800<br />
20-NOV-06 304,800 - 1,000 3,400 304,800 - - 284,400<br />
21-NOV-06 284,400 - - 700 284,400 - - 284,100<br />
22-NOV-06 284,100 - 20,500 28,200 284,100 - - 304,600<br />
23-NOV-06 304,600 - 7,000 912,000 304,600 - - 247,900<br />
24-NOV-06 247,900 - 20,000 419,500 247,900 - - 251,400<br />
27-NOV-06 251,400 - 15,200 102,200 251,400 - - 256,400<br />
28-NOV-06 256,400 - 236,400 2,624,600 256,400 - - 449,100<br />
29-NOV-06 449,100 - 131,700 633,900 449,100 - - 438,000<br />
30-NOV-06 438,000 - 8,300 11,800 438,000 - - 439,200<br />
01-DEC-06 439,200 - 268,000 345,400 439,200 - - 473,700<br />
04-DEC-06 473,700 - 298,200 431,900 5,000 - - 472,200<br />
05-DEC-06 940,900 - 35,700 19,500 471,900 - - 6,500<br />
06-DEC-06 475,500 - 37,700 52,300 475,500 - - 479,400<br />
07-DEC-06 479,400 - 2,300 243,800 479,400 - - 234,900<br />
08-DEC-06 234,900 - - 100 234,900 - - -<br />
2,187,300 6,746,900<br />
The clients who traded in CTTL through FCEL includes Mr. Naveed Haider Bukhari, Mr. Asim<br />
Mehmood <strong>and</strong> Mr. Suleman Ahmed Saeed Al-Hoqani.<br />
CONCLUSION<br />
We have not found any conclusive evidence to suggest that the brokerage house was in violation of the<br />
R-12 of code of the conduct of the Brokers <strong>and</strong> Agents Registration Rules 2001.<br />
85
5.2.7 FIRST PAKISTAN SECURITIES (FPS):<br />
First Pakistan <strong>Securities</strong> is a member of Lahore Stock <strong>Exchange</strong>. It has been trading with First National<br />
Equities <strong>and</strong> Orix Investment Bank. During the period under review we have been informed by the<br />
brokerage house that almost all the trading pertains to its client Mr. Irfan Mehmood, brother of Imran<br />
Mehmood, CFO of CTTL.<br />
During the period under review trading pattern of the Brokerage house under CTTL scrip, executed<br />
through two KSE members namely OIB<strong>and</strong> First national Equity Limited is given below:<br />
Open CFS Buy Sale Avg. Avg. Buy Avg. Sale Financee Market % to<br />
Date Position Volume Volume Price Value Value Qty. Volume M.V<br />
07 Nov 2006 - - 1,000 52.25 - 52,250 - 6,640,900 0.02<br />
16 Nov 2006 - 38,500 - 56.72 2,183,592 - 38,500 6,022,600 0.64<br />
17 Nov 2006 38,500 5,395,500 - 59.09 318,824,646 - 5,395,500 12,585,300 42.87<br />
17 Nov 2006 - 88,400 58.46 - 5,167,864 - 12,585,300 0.70<br />
20 Nov 2006 5,395,500 600 - 62.80 37,680 - 5,396,100 690,900 0.09<br />
21 Nov 2006 5,396,100 700 - 65.90 46,130 - 5,396,800 586,100 0.12<br />
22 Nov 2006 5,396,800 89,400 - 69.15 6,182,010 - 5,486,200 1,614,700 5.54<br />
23 Nov 2006 5,486,200 169,000 - 72.60 12,269,400 - 5,655,100 1,996,800 8.46<br />
23 Nov 2006 - 100 72.60 - 7,260 - 1,996,800 0.01<br />
24 Nov 2006 5,655,100 227,100 - 76.20 17,305,020 - 5,625,500 1,839,500 12.35<br />
28 Nov 2006 5,549,500 2,001,000 - 84.00 168,084,000 - 6,330,500 7,204,000 27.78<br />
28 Nov 2006 - 1,210,000 84.00 - 101,640,000 - 7,204,000 16.80<br />
29 Nov 2006 6,330,500 - 25,000 88.15 - 2,203,750 6,315,500 10,518,600 0.24<br />
30 Nov 2006 6,315,500 1,622,500 - 92.60 150,243,500 - 7,953,000 4,568,500 35.51<br />
30 Nov 2006 - 575,000 92.60 - 53,245,000 - 4,568,500 12.59<br />
01 Dec 2006 7,953,000 1,165,500 - 97.20 113,286,600 - 9,068,500 15,376,600 7.58<br />
01 Dec 2006 - 25,000 97.20 - 2,430,000 - 15,376,600 0.16<br />
04 Dec 2006 9,068,500 - 2,800,000 102.05 - 285,740,000 5,768,500 15,554,200 18.00<br />
05 Dec 2006 5,768,500 25,000 - 96.90 2,422,500 - 4,818,500 8,769,500 0.29<br />
05 Dec 2006 - 600,000 97.18 - 58,310,000 - 8,769,500 6.84<br />
07 Dec 2006 4,818,500 - 18,100 87.50 - 1,583,750 4,818,500 322,700 5.61<br />
08 Dec 2006 4,818,500 - 6,200 83.15 - 515,530 4,818,500 75,600 8.20<br />
Total 10,734,800 5,348,800 73.67 95.52<br />
Further review of table shows instances where substantial quantities of shares were bought <strong>and</strong> on the<br />
same day were squared up at the same rate. Refer Trading on Nov 28, 2006 <strong>and</strong> Nov 30, 2006.<br />
5.2.7.1 Price Manipulation<br />
During the period under review the buying <strong>and</strong> selling by FPS on account of its client in CTTL shares<br />
(5.1.8.1), some times exceeded 42% of the market turnover of the particular day (Refer Trading on Nov<br />
17, 2006).<br />
86
Additionally an instance has been noted where an attempts was made by the Brokerage house on<br />
account of its Client to influence to price during the trading sessions.<br />
Date UIN Buy Frequency Open High Low Close Range Buy<br />
Volume<br />
17 Nov 2006 00000012207/20020902 Buy 126 57.75 59.85 57.2 59.85 9.7 5,395,500<br />
5.2.7.2 Pre-open trading session activity<br />
While reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where AFQ manipulated<br />
the CTTL shares price by placing bulk quantity orders at upper level/lower level price lock, as<br />
applicable. An analysis of Pre-open session has revealed an abnormal trading behavior of the<br />
Brokerage house that has been summarized below:<br />
Total<br />
Total As % to<br />
Member Order No. of Orders Queued Market Market<br />
Date Open Close Client Name code Qty Lot orders Qty Price Turnover Turnover<br />
24-Nov 72.6 76.2 First Pakistan Sec Ltd 175 300,000 8 2,400,000 76.2 1,839,500 130%<br />
300,000 7 2,100,000<br />
27-Nov 76.2 80 First Pakistan Sec Ltd 175 100,000 1 100,000 80 2,890,300 76%<br />
200,000 9 1,800,000<br />
30-Nov 88.2 92.6 First Pakistan Sec Ltd 175 125,000 1 125,000 92.6 4,568,500 42%<br />
1-Dec 92..60 97.2 First Pakistan Sec Ltd 175 200,000 7 1,400,000 97.2 15,376,600 9%<br />
101.9<br />
100,000 3 300,000<br />
4-Dec 97.2 5 First Pakistan Sec Ltd 175 200,000 8 1,600,000 102.05 15,554,000 12%<br />
7-Dec 92.1 87.5 First Pakistan Sec Ltd 175 200,000 10 2,000,000 87.5 322,700 620%<br />
Furthermore, while reviewing the trading pattern of the FPSL it has been observed that bulk quantity of<br />
CTTL shares was bought at lower values <strong>and</strong> subsequently the shares were sold at higher prices. Please<br />
refer table given in 5.1.8.1 which shows that bulk quantity of shares were bought on Nov 17 <strong>and</strong> Nov<br />
28, 2006 at relatively lower prices whereas selling at higher prices was done on Nov 28 <strong>and</strong> Dec 4, 2006.<br />
CONCLUSION:<br />
In view of the above, it appears that FPSL was facilitating the Group by allowing them to take huge<br />
trading positions in shares of CTTL, financing their massive positions in CFS, influencing price of the<br />
scrip by way of putting bulk quantity orders at the upper. Lower level price locks during pre-open<br />
trading sessions.<br />
87
It is therefore concluded that the Brokerage House was in violation of the R-12 of code of the conduct of<br />
the Brokers <strong>and</strong> Agents Registration Rules 2001.<br />
88
5.3 FINDINGS RELATED TO OTHER ACTIVE TRADING PERSONS<br />
5.3.1 JUNAID HABIB (JH) - Non Group Member:<br />
Junaid Habib is a client of Shahid Ali Habib <strong>Securities</strong> limited. He opened his account on June 16, 2006<br />
but only traded in December 2006. The share position of JH as on December 8, 2006 include:<br />
Shares in Shares under Shares placed under Total Holding % age of total<br />
CDS CFS Repo Arrangement<br />
paid up capital<br />
0 1,500,000 0 1,500,000 2.29%<br />
5.3.1.1 Trading pattern in Ready Market<br />
During the period under review trading position of JH is given hereunder:<br />
Date<br />
Open<br />
Position Buy Sale Avg.<br />
Sale Financee Market<br />
CFS Volume Volume Price Buy Value Value Qty. Volume<br />
28 Nov 2006 - - - - - - - 7,204,000<br />
01 Dec 2006 - - - - - - - 15,376,600<br />
01 Dec 2006 - - - - - - 15,376,600<br />
04 Dec 2006 - - - - - - 15,554,200<br />
04 Dec 2006 - - - - - 15,554,200<br />
05 Dec 2006 - 1,500,000 - 98.21 147,321,610 - 1,500,000 8,769,500<br />
07 Dec 2006 1,500,000 - - - - - 1,500,000 322,700<br />
Total 1,500,000 - 147,321,610<br />
Buy – Sale = 1,500,000<br />
o While reviewing client ledger provided by Shahid Ali <strong>Securities</strong> we noted that the trader of<br />
Junaid Habib <strong>and</strong> Naveed Haider Bukhari (It may be noted that Naveed Hailer Bukhari is the<br />
key member of the Group) is the same person, named Mr. Hasnain Ali. This fact could possibly<br />
point to the fact that Junaid Habib might be the part of Group.<br />
o JH activity in the market for the past month was restricted to 2,000 shares of AHSL. Purchase was<br />
paid by JH by cheque that was dishonored. Current position is that amounts due to Shahid Ali<br />
Habib <strong>Securities</strong> are still outst<strong>and</strong>ing.<br />
o While reviewing account opening form <strong>and</strong> authority letter for trading, relating to Naveed<br />
Haider Bukhari, provided by Shahid Ali Habib <strong>Securities</strong>, we noted following important notes:<br />
Hasnain Ali, has been given authority to operate the account of Naveed H. Bukhari,<br />
An annotation has been given stating that “Same as Junaid Habib commission”.<br />
89
JH opened the account on June 16, 2006 <strong>and</strong> executed one transaction on Dec 5, 2006 <strong>and</strong><br />
did not trade in CTTL or any other scrip. The modus oper<strong>and</strong>i gives rise to the suspicion<br />
that he was fronting for one of the Group members.<br />
Conclusion: The methodology adopted by the Junaid Habib for trading <strong>and</strong> timing of the trading<br />
together with the fact that he did not pay for the purchase that he made, is similar to the modus oper<strong>and</strong>i<br />
adopted by other members of the Group, <strong>and</strong> there seems to be possibility that he may be some how<br />
associated with the Group.<br />
5.3.1.3 Price Manipulation<br />
Date Buy Freq Open High Low Close Volume<br />
20061201 Buy 7 91 92 91 92 50,000<br />
20061204 Buy 10 97.8 99 97.8 99 150,000<br />
Please refer Annexure 10H for graphical presentation for above referred activity.<br />
Conclusion: Above instances indicate that attempts were made by JH to buy on uptick <strong>and</strong> thus<br />
manipulate the share price. However since the volumes are so little, it could not possibly be a violation<br />
of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.3.1.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
No instances were found.<br />
5.3.1.5 Change in beneficial ownership<br />
No instances were found.<br />
5.3.1.6 Pre-open trading session activity<br />
No instances were found.<br />
5.3.1.7 Pumping <strong>and</strong> dumping<br />
No instances were found.<br />
5.3.1.8 Non-compliance of Short Selling Regulations<br />
90
No instances were found.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name Junaid Habib<br />
Father Name Habib Ahmed<br />
Date of Birth Dec 25, 1976<br />
CNIC No. 42501-9719313-7<br />
Family No. J9N94V<br />
Address House No. 174, DOHS, Phase 1, Malir Cantt., Karachi<br />
Details of the nominee from the account opening form of Shahihd Ali Habib <strong>Securities</strong> are as follows:<br />
Name of nominee Mrs. Asfia Junaid<br />
Husb<strong>and</strong> Name Junaid Habib<br />
CNIC No. 42201-0462800-8<br />
Address House No. 174, DOHS, Phase 1, Malir Cantt., Karachi<br />
Conclusion<br />
Based on the observations noted above it could not be conclusively proven that JH, assisted the Group in<br />
wash sales <strong>and</strong> price manipulation.<br />
91
5.3.2 Mohammad Aqeel (MA) - Non Group Member:<br />
Mohammad Aqeel is a client of Motiwala <strong>Securities</strong>. The share position of the client as on Dec 8, 2006<br />
include:<br />
Shares in Shares under Shares placed under Total Holding % age of total paid<br />
CDS CFS Repo Arrangement<br />
up capital<br />
0 3,900,000 0 3,900,000 5.97%<br />
5.3.2.3 Trading pattern in Ready Market<br />
Date<br />
Open CFS<br />
Position<br />
Buy<br />
Volume<br />
Sale<br />
Volume<br />
Avg.<br />
Price<br />
Avg. Buy<br />
Value<br />
Avg. Sale<br />
Value<br />
Financee<br />
Qty<br />
Market<br />
Volume<br />
07 Nov 2006 - - 75,000 54.90 - 4,117,500 6,640,900<br />
04 Dec 2006 - 1,299,500 - 101.99 132,533,367 - 1,299,500 15,554,200<br />
05 Dec 2006 1,299,500 2,600,500 - 96.90 251,988,450 - 3,900,000 8,769,500<br />
06 Dec 2006 3,900,000 - 100,000 92.40 - 9,240,000 3,800,000 5,823,400<br />
07 Dec 2006 3,800,000 100,000 - 87.50 8,750,000 - 3,900,000 322,700<br />
Total 4,000,000 175,000 393,271,817 13,357,500<br />
Buy – Sale = 3,825,000<br />
Copies of the cheques received from the client were not available with the brokerage house which<br />
limited our work to clearly establish that Muhammad Aqeel was trading in connivance with Group<br />
members.<br />
Conclusion: Although we have not been able to find any conclusive evidence that shows that MA was<br />
part of the Group, but the modus oper<strong>and</strong>i, adopted by MA, i.e. timing <strong>and</strong> manner in which trading is<br />
done creates suspicion that Muhammad Aqeel was acting as front for the Group.<br />
5.3.2.4 Wash Trades <strong>and</strong> Circular Trades<br />
No instances were found.<br />
5.3.2.5 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
No instances of violation were found.<br />
5.3.2.6 Change in beneficial ownership<br />
No instances of violation were found.<br />
5.3.2.7 Pre-open trading session activity<br />
92
No instances of violation were found.<br />
5.3.2.8 Pumping <strong>and</strong> dumping<br />
No instances of violation were found.<br />
5.3.2.9 Non-compliance of Short Selling Regulations<br />
Sold 75,000 shares on Nov 7, 2006 when he does not seem to have any beneficial interest.<br />
General Information:<br />
Details as per the CNIC:<br />
Name Muhammad Aqeel<br />
Father Name Suleman<br />
Date of Birth June 28, 1969<br />
CNIC No. 42000-0424029-5<br />
Family No. KN1C5S<br />
Address House No. 3, Younus Plaza, Chnadni Chowk, Karachi<br />
Details extracted from Account opening form of the client received from Motiwala securities Ltd:<br />
Address: Room-701, 7 th floor, Business & Finance trade Centre, I.I.Chundrigar Road, Karachi<br />
Tel: 2471689, 2471914-5<br />
Conclusion<br />
The modus oper<strong>and</strong>i, adopted by MA, i.e. timing <strong>and</strong> manner in which trading is done creates suspicion<br />
that Muhammad Aqeel was acting as front for the Group or was a front for the brokerage house.<br />
However we have not been able to prove conclusively that this was the case.<br />
93
5.3.3 HABIB UN NISA (HUN) - Non Group Member:<br />
Habib un Nisa is the client of Sherman <strong>Securities</strong>. The client had no outst<strong>and</strong>ing financing position by<br />
December 08, 2006. The share position of the client as on Dec 8, 2006 include:<br />
Shares Shares Shares placed under Total Holding % age of total paid<br />
in CDS under CFS Repo Arrangement<br />
up capital<br />
0 0 0 0 0<br />
5.3.3.1 Trading Pattern in ready Market<br />
Date<br />
Open.<br />
Position CFS<br />
Buy<br />
Volume<br />
Sale<br />
Volume<br />
Avg.<br />
Price<br />
Avg. Buy<br />
Value<br />
Avg. Sale Financee<br />
Value Qty.<br />
Market<br />
Volume<br />
15 Nov 2006 - 100,000 - 55.44 5,543,784 - 2,624,600<br />
16 Nov 2006 - 250,000 - 56.82 14,204,613 - 6,022,600<br />
16 Nov 2006 - - 100,000 56.68 - 5,667,857 6,022,600<br />
17 Nov 2006 - 674,800 - 57.78 38,987,234 - 12,585,300<br />
17 Nov 2006 - - 924,800 58.94 - 54,510,486 12,585,300<br />
20 Nov 2006 - 7,300 - 62.80 458,440 - 690,900<br />
21 Nov 2006 - 25,000 - 65.90 1,647,500 - 586,100<br />
22 Nov 2006 - 4,600 - 69.15 318,090 - 1,614,700<br />
23 Nov 2006 - 25,700 - 72.60 1,865,820 - 1,996,800<br />
24 Nov 2006 25,500 - 76.20 1,943,100 - 51,200 1,839,500<br />
27 Nov 2006 51,200 5,600 - 80.00 448,000 - 51,300 2,890,300<br />
28 Nov 2006 51,300 68,800 - 84.00 5,779,200 - 51,300 7,204,000<br />
29 Nov 2006 51,300 - 100,000 79.80 - 7,980,000 33,100 10,518,600<br />
01 Dec 2006 33,100 25,000 - 97.13 2,428,333 - 15,376,600<br />
01 Dec 2006 - - 176,000 95.41 - 16,792,600 15,376,600<br />
04 Dec 2006 - 10,000 - 101.00 1,010,000 - 10,000 15,554,200<br />
05 Dec 2006 10,000 15,000 - 100.39 1,505,850 - 25,000 8,769,500<br />
06 Dec 2006 25,000 25,000 - 92.10 2,302,500 - 5,823,400<br />
06 Dec 2006 - - 50,000 92.13 - 4,606,284 5,823,400<br />
Total<br />
Buy – Sale = (88,500)<br />
1,262,300 1,350,800 78,442,464 89,557,227<br />
Conclusion: HUN seems to be a classic day or short term trader.<br />
5.3.3.2 Wash Trades <strong>and</strong> Circular Trades<br />
No instances of wash or circular trades were found as acting independently.<br />
5.3.3.3 Price Manipulation<br />
No instances of violations noted.<br />
5.3.3.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
94
No instances of non-compliance were observed.<br />
5.3.3.5 Change in beneficial ownership<br />
No instances of non-compliance were observed.<br />
5.3.3.6 Pre-open trading session activity<br />
While reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where HUN manipulated<br />
the CTTL shares price by placing bulk quantity orders at upper level/lower level price lock, as<br />
applicable. An analysis of Pre-open session has revealed an abnormal trading behavior that has been<br />
summarized below:<br />
Total<br />
Total<br />
Order<br />
entered as<br />
Member Buy/ Order No. of Orders Queued Market % to Total<br />
Date Open Close code Sale Qty Lot orders Qty Price Turnover Market<br />
24-Nov* 72.6 76.2 6 Buy 250,000 2 500,000 76.2 1,839,500 27%<br />
* She placed orders but did not execute. Did she place order or did broker use her name.<br />
Conclusion: Above instances tantamount to market manipulation <strong>and</strong> therefore attracts provisions of S-<br />
17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969.<br />
5.3.3.7 Pumping <strong>and</strong> dumping<br />
No instances of non-compliance were observed.<br />
5.3.3.8 Non-compliance of Blank Selling Regulations<br />
On Dec 1, 2006 we noted that HUN had a short position of 88,500 shares in CTTL. Short position was<br />
reduced to 63,500 shares by Dec 5, 2006 but then on Dec, 6, 2006 it was increased back to 88,500. Since<br />
HUN has no beneficial interest, she indulged in blank selling.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name Habib un Nisa<br />
Father/Husb<strong>and</strong> Name Abbas<br />
Date of Birth<br />
CNIC No. 42201-4282558-4<br />
Family No. L23P5C<br />
Address 118/1, Mian Khyaban-e-Shaheen, Phase VI, DHA, Karachi<br />
Details of the nominee from the account opening form of Sherman <strong>Securities</strong> are as follows:<br />
95
Name of nominee Ahmed Mohiuddin<br />
Father Name Muhammad Fayyaz Hussain<br />
CNIC No. 42201-6511790-3<br />
Conclusion<br />
Based on the observations noted above it is evident that HUN, was violating the securities law by<br />
manipulating the price of the scrip in pre-open session <strong>and</strong> also by indulging in short selling. By<br />
indulging in above referred manipulative <strong>and</strong> prohibitive activities HUN has violated various law <strong>and</strong><br />
regulations.<br />
96
5.3.4 Alishba Naz (ALN) - Non Group Member:<br />
Alishba Naz is the client of First National Equities Limited. The share position of ALN as on Dec 8, 2006<br />
include:<br />
Shares in Shares under Shares placed under Repo Total Holding % age of total paid<br />
CDS CFS<br />
Arrangement<br />
up capital<br />
0 0 0 0 0<br />
5.3.4.1 Trading Pattern in Ready Market<br />
Date<br />
Open CFS<br />
Position<br />
Buy<br />
Volume<br />
Sale<br />
Volume<br />
Avg.<br />
Price<br />
Avg. Buy<br />
Value<br />
Avg. Sale<br />
Value<br />
Financee<br />
Qty.<br />
Market<br />
Volume<br />
07 Nov 2006 - 10,000 - 54.90 549,000 - - 6,640,900<br />
08 Nov 2006 - - 10,000 54.50 - 545,042 - 2,826,900<br />
14 Nov 2006 - - 4,000 54.73 - 218,900 - 2,450,900<br />
15 Nov 2006 - 2,000 - 55.25 110,500 - - 2,624,600<br />
16 Nov 2006 - 275,800 - 56.88 15,687,477 - - 6,022,600<br />
16 Nov 2006 - - 184,300 57.12 - 10,527,719 - 6,022,600<br />
17 Nov 2006 - 24,400 - 57.00 1,390,800 - - 12,585,300<br />
17 Nov 2006 - - 106,900 57.84 - 6,183,119 - 12,585,300<br />
21 Nov 2006 - 200 - 65.90 13,180 - - 586,100<br />
22 Nov 2006 - - 200 69.15 - 13,830 - 1,614,700<br />
23 Nov 2006 - 120,200 - 72.60 8,726,520 - - 1,996,800<br />
24 Nov 2006 - 88,700 - 76.20 6,758,940 - - 1,839,500<br />
27 Nov 2006 - 2,500 - 80.00 200,000 - - 2,890,300<br />
28 Nov 2006 - 35,000 - 84.00 2,940,000 - - 7,204,000<br />
29 Nov 2006 - 648,000 - 80.07 51,883,593 - - 10,518,600<br />
29 Nov 2006 - - 675,400 86.08 - 58,139,498 - 10,518,600<br />
30 Nov 2006 - - 10,000 92.60 - 926,000 - 4,568,500<br />
01 Dec 2006 - - 15,000 93.39 - 1,400,786 - 15,376,600<br />
06 Dec 2006 - 57,300 - 95.27 5,458,971 - - 5,823,400<br />
06 Dec 2006 - - 57,300 93.62 - 5,364,590 - 5,823,400<br />
08 Dec 2006 - 300 - 83.15 24,945 - - 75,600<br />
08 Dec 2006 - - 300 83.15 - 24,945 - 75,600<br />
Total 1,264,400 1,063,400 93,743,926 83,344,429<br />
Buy – Sale = 201,000<br />
Conclusion: ALN is a classic day or short term trader.<br />
5.3.4.2 Wash Trades <strong>and</strong> Circular Trades<br />
No instances found.<br />
5.3.4.3 Price Manipulation<br />
No instances of violation were noted.<br />
97
5.3.4.4 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
No instances of violation were found.<br />
5.3.4.5 Change in beneficial ownership<br />
No instances of violation were found.<br />
5.3.4.6 Pre-open trading session activity<br />
No violation of law was observed as ALN placed orders <strong>and</strong> purchased the same.<br />
5.3.4.7 Pumping <strong>and</strong> dumping<br />
Conclusion: No instances of violation were found.<br />
5.3.4.8 Non-compliance of Short Selling Regulations<br />
Conclusion: No instances found.<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name Alishba Naz<br />
Husb<strong>and</strong> Name Ahsan Ali Farid<br />
Date of Birth Feb 13, 1983<br />
CNIC No. 42301-8358332-6<br />
Family No. O10D84<br />
Address Faiz Bi Bibi Building, Plot No. RC-4/171, Peru Buddha, Gazoor Abad, Flat No. 7,<br />
Ranchoor Lane, Karachi<br />
Details of the nominee from the account opening form of Al-Hoqani <strong>Securities</strong> are as follows:<br />
Name of nominee Ehsan Ali Farid<br />
Father Name Sarwar Ali Azeem<br />
CNIC No. 42301-7497663-7<br />
Address Faiz Bi Bibi Building, Plot No. RC-4/171, Pero Budha, Gazoor Abad, Flat No. 7,<br />
Ranchoor Lane, Karachi<br />
Conclusion<br />
No violation of law took place.<br />
98
5.3.5 ABIDA NASREEN (AN) - Non Group Member:<br />
Abida Nasreen is a client of First National Equities Limited. AN neither had any outst<strong>and</strong>ing financing<br />
position on December 08, 2006 nor was seen on the selling side for the period under review. Total share<br />
position of AN as at December 8, 2006 includes:<br />
Shares in Shares Shares placed under<br />
% age of total paid<br />
CDS under CFS Repo Arrangement Total Holding up capital<br />
0 0 0 0 0<br />
5.3.5.1 Trading pattern in the Ready Market<br />
During the period under review, trading position of the client in Ready Market is as follows:<br />
Open Buy Sale Avg. Avg. Buy Avg. Sale Financee Market<br />
Date position CFS Volume Volume Price Value Value Qty. Volume<br />
27 Nov 2006 - 101,200 2,800 80.00 8,096,000 - - 2,890,300<br />
28 Nov 2006 - 254,700 - 84.00 21,394,800 - 2,000 7,204,000<br />
01 Dec 2006 - 1,001,700 263,500 97.20 97,365,240 - 350,000 15,376,600<br />
Total 1,357,600 266,300 126,856,040 -<br />
Buy – Sale = 1,091,300<br />
Conclusion: No evidence that AN was part of Group. Although trading shows, she should have<br />
position of 1,091,300 shares, there is no such position in CDC.<br />
5.3.5.2 Wash Trades <strong>and</strong> Circular Trades<br />
Conclusion: No instances found<br />
5.3.5.3 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
Conclusion: No instances found<br />
5.3.5.4 Change in beneficial ownership<br />
Conclusion: No instances found<br />
5.3.5.5 Pre-open trading session activity<br />
While reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where AN manipulated<br />
the CTTL shares price by placing bulk quantity orders at upper level/lower level price lock, as<br />
99
applicable. An analysis of Pre-open session has revealed an abnormal trading behavior that has been<br />
summarized below:<br />
Total<br />
Total<br />
Order<br />
entered as<br />
Member Order Qty No. of Orders Queued Market % to Total<br />
Date Open Close Client Name code Lot orders Qty Price Turnover Market<br />
Nov 22 65.9 69.15 Abida Nasreen 077 300,000 3<br />
1,614,700 62%<br />
100,000 1 1,000,000 69.15<br />
Nov 27 76.20 80 Abida Nasreen 175 250,000 2 800,000 80 2,890,300 28%<br />
300,000 1<br />
Dec 1 92..60 97.20 Abida Nasreen 175 200,000 5 1,000,000 97.20 15,376,600 7%<br />
Conclusion: Above instances of Nov 22 <strong>and</strong> Nov 27, 2006 tantamount to market manipulation <strong>and</strong><br />
therefore attracts provisions of S-17e of <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969. The orders placed on<br />
Dec 1, 2006 were executed <strong>and</strong> seemed to be a genuine order placed in pre-open session.<br />
5.3.5.6 Pumping <strong>and</strong> dumping<br />
Conclusion: No instances found<br />
5.3.5.7 Non-compliance of Short Selling Regulations<br />
Conclusion: No instances found<br />
General Information:<br />
Details as per the CNIC are given hereunder:<br />
Name Abida Nasreen<br />
Husb<strong>and</strong> Name Anwer Ahmed<br />
Date of Birth Aug 8, 1947<br />
CNIC No. 17301-4369191-8<br />
Family No. S95P6D<br />
Address Phase 2, Hyat Abad, House No. 109, Street No. 10, Sector J-2, Peshawar<br />
Conclusion<br />
Based on the observations noted above it is evident that AN, was found violating the securities law by<br />
manipulating the price of the scrip. By indulging in above referred manipulative <strong>and</strong> prohibitive<br />
activities she has violated various law <strong>and</strong> regulations.<br />
100
5.3.6 Mohammad Yaseen (MY) - Non Group Member:<br />
Mohammad Yaseen is a client of Muhammad Ayub Younus <strong>Securities</strong> (Pvt.) Limited. MY had no<br />
outst<strong>and</strong>ing share position by December 08, 2006. Total share position of MY as at December 8, 2006<br />
includes:<br />
Shares in Shares Shares placed under Repo Total Holding % age of total paid<br />
CDS under CFS Arrangement<br />
up capital<br />
0 0 0 0 0<br />
5.1.15.1 Trading pattern in the Ready Market<br />
During the period under review, trading position of MY in Ready Market is as follows:<br />
Open CFS Buy Sale Avg. Avg. Buy Avg. Sale Financee Market<br />
Date Position Volume Volume Price Value Value Qty. Volume<br />
07 Nov 2006 - 252,500 - 53.81 13,586,831 - - 6,640,900<br />
07 Nov 2006 - - 200,000 54.44 - 10,888,545 - 6,640,900<br />
08 Nov 2006 - 63,100 - 54.47 3,437,280 - - 2,826,900<br />
08 Nov 2006 - - 70,600 54.76 - 3,866,383 - 2,826,900<br />
10 Nov 2006 - 47,300 - 53.43 2,527,110 - - 1,109,000<br />
10 Nov 2006 - - 7,500 53.61 - 402,107 - 1,109,000<br />
13 Nov 2006 - - 50,000 54.21 - 2,710,417 - 2,838,500<br />
14 Nov 2006 - - 49,800 55.13 - 2,745,640 - 2,450,900<br />
15 Nov 2006 - 80,000 - 54.96 4,396,533 - - 2,624,600<br />
15 Nov 2006 - - 35,500 56.15 - 1,993,467 - 2,624,600<br />
16 Nov 2006 - - 44,500 55.87 - 2,486,298 - 6,022,600<br />
20 Nov 2006 - 255,900 - 62.80 16,070,520 - 200,000 690,900<br />
21 Nov 2006 - 8,800 - 65.90 579,920 - 200,000 586,100<br />
22 Nov 2006 - 473,300 - 69.15 32,728,695 - 670,000 1,614,700<br />
28 Nov 2006 - - 500,000 84.00 - 42,000,000 43,000 7,204,000<br />
29 Nov 2006 - - 60,000 88.20 - 5,292,000 - 10,518,600<br />
01 Dec 2006 - 200,000 - 90.60 18,119,464 - - 15,376,600<br />
01 Dec 2006 - - 140,000 97.20 - 13,608,000 - 15,376,600<br />
04 Dec 2006 - 25,000 - 101.95 2,548,750 - - 15,554,200<br />
04 Dec 2006 - - 130,000 101.97 - 13,256,518 - 15,554,200<br />
05 Dec 2006 - 25,000 - 96.90 2,422,500 - - 8,769,500<br />
06 Dec 2006 - 138,100 - 92.64 12,793,522 - - 5,823,400<br />
08 Dec 2006 - - 100 83.15 - 8,315 - 75,600<br />
TOTAL<br />
Buy – Sale = 281,000<br />
1,569,000 1,288,000 109,211,125 99,257,690<br />
Conclusion: Typical day trader.<br />
5.3.6.2 Wash Trades <strong>and</strong> Circular Trades<br />
101
No wash or circular trades were found.<br />
5.3.6.3 Non-compliance of Listed Companies (Substantial Acquisition of voting shares <strong>and</strong><br />
takeovers) Ordinance, 2002<br />
Conclusion: No instances found<br />
5.3.6.4 Change in beneficial ownership<br />
Conclusion: No instances found<br />
5.3.6.5 Pre-open trading session activity<br />
While reviewing pre-open session bids <strong>and</strong> offers data, we observed instances where MY manipulated<br />
the CTTL shares price by placing bulk quantity orders at upper level price lock. An analysis of Pre-<br />
open session has revealed an abnormal trading behavior that has been summarized below:<br />
Member Buy/<br />
Date Open Close code Sale<br />
Nov 22 65.9 69.15 166 Buy<br />
Buy<br />
Buy<br />
Order<br />
Qty Lot<br />
300,000<br />
200,000<br />
100,000<br />
No. of<br />
orders<br />
1<br />
1<br />
3<br />
Total<br />
Total<br />
Order<br />
entered as<br />
Orders Queued Market % to Total<br />
Qty Price Turnover Market<br />
800,000 69.15 1,614,700 50%<br />
Conclusion: Above instances tantamount to market manipulation as MY actually only purchased<br />
473,000 shares on Nov 22, 2006 at the rate of Rs. 69.15 <strong>and</strong> the balance order was cancelled.<br />
5.3.6.6 Pumping <strong>and</strong> dumping<br />
Conclusion: No instances were found where MY was involved in Pumping <strong>and</strong> Dumping.<br />
5.3.6.7 Non-compliance of Short Selling Regulations<br />
Conclusion: No instances found<br />
General Information<br />
Details as per the CNIC are given hereunder:<br />
Name: Muhammad Yaseen<br />
Father Name: Hassan Noor Muhammad<br />
Date of Birth: 1950<br />
CNIC No: 42301-0879042-5<br />
102
Family No: LS7R2L<br />
Address: House No. 14, Nagori Palace, Moosa Lane, Karachi<br />
Conclusion<br />
Based on the observations noted above it is evident that MY was not violating the securities law in any<br />
manner except for price manipulation in pre-open.<br />
103
6 REGULATORY WEAKNESSES OBSERVED AT KSE<br />
The report also addresses some weaknesses into the existing Risk Management System of KSE,<br />
<strong>and</strong> the persons involved in the insider trading, price manipulation <strong>and</strong> prohibitive practices<br />
have taken benefit of these weaknesses.<br />
6.1 INEFFECTIVE ROLE AS FRONT LINE REGULATOR<br />
During the course of inquiry it has also been observed that Karachi Stock <strong>Exchange</strong> has not<br />
played its role as a front line regulator by properly enforcing its rules <strong>and</strong> regulations <strong>and</strong><br />
taking concrete action when evidence of insider trading <strong>and</strong> prices manipulation become<br />
rampant. Further KSE has not taken any proactive action when the Volume of CTTL shares<br />
under CFS reached 91% of free float of the company stock.<br />
6.2 ABSENCE OF SPECIAL MARGINS<br />
The Special Margin under the New Risk Management Regime were implemented from<br />
December 4, 2006 in a phased manner. However, taking benefit of this aspect, the persons<br />
involved in market manipulation kept on increasing price of the CTTL until December 4, 2006,<br />
thereby generating liquidity on the one h<strong>and</strong> <strong>and</strong> increasing the value of collateral on the other<br />
h<strong>and</strong> as the CCTL shares were bought under leveraged mode.<br />
This fact is reminiscent of the events of May 2000, when, in addition to various tools employed<br />
by the market manipulators, one engineered activity was infact the scheme where prices of the<br />
scrip in which weak buyers had interests, were increased on a daily basis <strong>and</strong> the resulting<br />
difference was taken out of the market by the weak buyers through routine settlements. COT 2<br />
Margin was at that time brought in to curb this market abuse however COT 2 was subsequently<br />
done away with by the KSE Board.<br />
While reviewing Callmate Telips Telecommunication Limited (CTTL) case where share prices<br />
were manipulated during the period November 3, 2006 till first week of December 2006, it<br />
becomes apparent that number of weak buyers have taken benefit of absence of Special Margin<br />
during that period. Even though presently the special Margins have been implemented since<br />
December 4, 2006, only 50% of the required margin is being collected under the phased wise<br />
plan as agreed with the market Participants. We believe that if special margins would have<br />
implemented at once as planned earlier by the SECP, than the persons behind the manipulation<br />
104
of the CTTL would not have been able to generate liquidity by way of increasing price of the<br />
scrip on a daily basis with such great ease.<br />
6.3 EXCESS QUANTITY OF CTTL SHARES ACCEPTED BY CLEARING HOUSE<br />
KSE did not implement the following position limits w.e.f. Dec 4, 2006 namely:<br />
• 1.0% of free float per client<br />
• 5.0% of free float per member<br />
• 40.0% of free float for CFS market<br />
Further the limit of shares acceptable as collateral i.e. 0.5% of free float per member was not<br />
implemented. It was interesting to note that CCTL vide its letter dated August 9, 2006 had<br />
provided KSE with information about the free float of the company. Data relating to CCTL scrip<br />
accepted as collateral by the KSE Clearing house depicted instances where even 900,000 shares<br />
of CTTL shares were accepted, which was around 2% of the free float of CTTL.<br />
6.4 CFS MARKET REGULATION WERE NOT IMPLEMENTED<br />
Instances have been observed when OIBsold 750,000 of CTTL shares in CFS market on behalf of<br />
its client Mr. Nadeem Ahmed Khan, member of the Group, despite the fact that Mr. Khan had<br />
no position in the ready market on that day. CFS facilty is only available against ready market<br />
purchases, however above mentioned activity suggest that CFS market was used to refinance<br />
earlier purchases. Thus defeating the entire rationale of the CFS market. We believe that KSE<br />
system should not have allowed these activities.<br />
6.5 ISSUES WITH UNIVERSAL IDENTIFICATION SYSTEM (UIN)<br />
Presently those clients who are trading at KSE by placing their orders through the members of<br />
LSE <strong>and</strong> ISE , are not identified through UIN as brokers of LSE <strong>and</strong> ISE use their own UIN code<br />
(only suffix / is added to identify the client trading). Due to this practice, our investigation was<br />
largely hampered <strong>and</strong> therefore it is possible that other persons who have been involved in the<br />
non-compliances of the relevant regulatory framework would escape from writ of law.<br />
105
6.6 Change in client codes<br />
On Nov 29, 2006 Mr. Asim Fayyaz Qureshi bought 5,844,500 shares from Orix Investment Bank.<br />
In order to avoid the disclosure as required under Listed Companies (Substantial Acquisition of<br />
voting shares <strong>and</strong> takeovers) Ordinance, 2002, the buying of AFQ was broken between<br />
Muhammad Ajmal Ansari (2,944,500 shares) <strong>and</strong> Asim Fayyaz Qureshi (2,900,000 shares). ORIX<br />
Investment bank, informed KSE management about transfer of AFQ buying to MAA, however,<br />
KSE, despite huge transactions, failed to take any concrete action over it.<br />
Likewise, as per the records submitted by the First National Equities Limited, it appears that<br />
brokerage house intimated KSE huge volume of trade correction in CTTL trades through its<br />
letters dated November 27, 2006, Nov 28, 2006 <strong>and</strong> Dec 1, 2006, but KSE failed to take any notice<br />
of such unusual information.<br />
In another instance, FNEL through its letter dated Nov 22, 2006 submitted information to KSE<br />
Deputy Manager Trading Affairs, about Client to client of 1,275,000 shares involving OIB<strong>and</strong><br />
FNEL.<br />
Despite such big volume being transacted through C to C <strong>and</strong> reported to KSE, appropriate<br />
regulatory measures were not taken in time.<br />
6.7 Roll over of CFS on daily basis<br />
We noted that KSE allowed CFS shares to be rolled over on a daily basis thereby allowing the<br />
financees to extract profits where the market is going up at the expense of the financier.<br />
6.8 Naked Roll over of CFS<br />
We noted that financees were being exempt from applicable margin in those cases where CFS<br />
open positions were released <strong>and</strong> rolled over on daily basis. Due to this practice, KSE by<br />
allowing it caused the clearing hosue to be exposed.<br />
106
CTTL Market Rates <strong>and</strong> turnover during the period Nov 1, 2006 to Dec 8, 2006.<br />
Rates Net %age Upper/<br />
Date Open High Low Close Change Change Lower Lock Turnover<br />
1-Nov-06 49.35 49 46.9 46.9 -2.45 -4.96% Lower lock 1,141,300<br />
2-Nov-06 46.9 47.95 46.35 47.5 0.6 1.28% 709,500<br />
3-Nov-06 47.5 49.85 48.35 49.85 2.35 4.95% Upper lock 818,000<br />
6-Nov-06 49.85 52.3 52.3 52.3 2.45 4.91% Upper lock 488,100<br />
7-Nov-06 52.3 54.9 50.2 54.9 2.6 4.97% Upper lock 6,640,900<br />
8-Nov-06 54.9 56 53.5 54.5 -0.4 -0.73% 2,826,900<br />
10-Nov-06 54.5 54 52.1 53.3 -1.2 -2.20% 1,109,000<br />
13-Nov-06 53.3 54.5 51 53.8 0.5 0.94% 2,838,500<br />
14-Nov-06 53.8 56 53.2 55.95 2.15 4.00% 2,450,900<br />
15-Nov-06 55.95 56.35 54.25 55.4 -0.55 -0.98% 2,624,600<br />
16-Nov-06 55.4 57.45 54.05 57 1.6 2.89% 6,022,600<br />
17-Nov-06 57 59.85 56.9 59.85 2.85 5.00% Upper lock 12,585,300<br />
20-Nov-06 59.85 62.8 62.8 62.8 2.95 4.93% Upper lock 690,900<br />
21-Nov-06 62.8 65.9 65.9 65.9 3.1 4.94% Upper lock 586,100<br />
22-Nov-06 65.9 69.15 69.15 69.15 3.25 4.93% Upper lock 1,614,700<br />
23-Nov-06 69.15 72.6 72.6 72.6 3.45 4.99% Upper lock 1,996,800<br />
24-Nov-06 72.6 76.2 76.2 76.2 3.6 4.96% Upper lock 1,839,500<br />
27-Nov-06 76.2 80 80 80 3.8 4.99% Upper lock 2,890,300<br />
28-Nov-06 80 84 84 84 4 5.00% Upper lock 7,204,000<br />
29-Nov-06 84 88.2 79.8 88.2 4.2 5.00% Upper lock 10,518,600<br />
30-Nov-06 88.2 92.6 92.6 92.6 4.4 5.00% Upper lock 4,568,500<br />
1-Dec-06 92.6 97.2 88 97.2 4.6 4.97% Upper lock 15,376,600<br />
4-Dec-06 97.2 102.05 95.2 101.95 4.75 4.89% 15,554,200<br />
5-Dec-06 101.95 103.7 96.9 96.9 -5.05 -4.95% Lower lock 8,769,500<br />
6-Dec-06 96.9 96 92.1 92.1 -4.8 -4.95% Lower lock 5,823,400<br />
7-Dec-06 92.1 87.5 87.5 87.5 -4.6 -4.99% Lower lock 322,700<br />
8-Dec-06 87.5 83.15 83.15 83.15 -4.35 -4.97% Lower lock 75,600<br />
ANNEXURE 1<br />
107
ANNEXURE 2<br />
Following tables present positions of top 20 buyer Members <strong>and</strong> Seller Members during the period<br />
under review:<br />
Member<br />
Buy % Contribution<br />
Code Member Name Buy Qty Transactions to Market<br />
175 First National Equities Ltd. 24,829,300 6,487 26<br />
77 OIB(Pak) Ltd 23,654,300 4,970 25<br />
110 Al-Hoqani Sec. & Inv. Cor. (Pv 11,234,800 3,293 12<br />
105 Shahid Ali Habib <strong>Securities</strong> (P 8,382,400 1,508 9<br />
198 Motiwala <strong>Securities</strong> (Pvt.) Ltd 4,099,700 326 4<br />
166 Amin Siddiq Parekh Sec.(Pvt.)L 2,623,000 3,758 3<br />
104 Moosa Noor Mohammed Shahzada & 2,596,400 523 3<br />
6 Sherman <strong>Securities</strong> (Pvt.) Ltd. 2,510,200 914 3<br />
57 First Capital Equities Ltd. 2,187,300 1,280 2<br />
58 Mohammed Ayub Younus Adhi 2,173,000 256 2<br />
12 Noman Abid & Co 1,573,600 397 2<br />
97 Invest Capital <strong>and</strong> Sec 1,490,700 333 2<br />
128 KASB 1,317,800 1,868 1<br />
67 ACE Sec 1,275,300 1,779 1<br />
7 Eastern Capital 1,219,400 1,772 1<br />
43 Live Sec 1,157,800 1,138 1<br />
84 M. Munir Khanani 1,141,600 991 1<br />
194 M.R.A Sec 988,000 950 1<br />
90 Darson Sec 819,000 535 1<br />
98 Mohammed Hussain Adhi 732,800 304 1<br />
Member<br />
Sold % Contribution<br />
Code Member Name Sold Qty Transactions to Market<br />
77 OIB(Pak) Ltd 20,171,700 2,580 25<br />
110 Al-Hoqani Sec. & Inv. Cor. (Pv 12,073,800 1,803 15<br />
175 First National Equities Ltd. 11,433,500 2,433 14<br />
57 First Capital Equities Ltd. 6,746,900 3,805 8<br />
128 KASB <strong>Securities</strong> Ltd. 2,980,500 2,534 4<br />
6 Sherman <strong>Securities</strong> (Pvt.) Ltd. 2,844,800 718 4<br />
200 Ali Husain Rajabali Limited 2,472,500 1,898 3<br />
166 Amin Siddiq Parekh Sec.(Pvt.)L 2,431,300 664 3<br />
142 Foundation <strong>Securities</strong> (Pvt.) L 1,967,300 251 2<br />
43 Live <strong>Securities</strong> (Private) Ltd. 1,961,700 1,397 2<br />
67 ACE Sec 1,921,900 1,557 2<br />
97 Invest Capital Sec 1,879,500 350 2<br />
149 Jahangir Siddiqui Cap. Markets 1,803,600 487 2<br />
90 Darson Sec 1,683,400 781 2<br />
7 Eastern Capital 1,673,600 2,063 2<br />
84 M. Munir Khanani 1,635,800 1,302 2<br />
50 Arif Habib Ltd 1,569,400 273 2<br />
105 Shahid Ali Habib Sec 1,339,300 232 2<br />
194 M.R.A Sec 1,166,100 567 1<br />
114 Amin Tai Sec 1,052,300 160 1<br />
108
ANNEXURE 3<br />
Table showing daily CFS position of CTTL during the period Nov 6, 2006 to December 8, 2006.<br />
Unreleased Open Total CFS<br />
Qty in Value in Qty in Value in<br />
Date Mln. Bln. Mln. Bln. Qty in Mln. Value in Bln.<br />
6-Nov-06 0.00 0.00 0.12 0.01 0.12 0.01<br />
7-Nov-06 0.01 0.00 1.60 0.09 1.60 0.09<br />
8-Nov-06 0.94 0.05 1.44 0.08 2.38 0.13<br />
10-Nov-06 0.29 0.02 2.13 0.11 2.42 0.13<br />
13-Nov-06 1.66 0.09 2.64 0.14 4.30 0.23<br />
14-Nov-06 3.13 0.17 1.50 0.08 4.63 0.25<br />
15-Nov-06 3.05 0.16 1.82 0.10 4.88 0.26<br />
16-Nov-06 3.10 0.17 4.22 0.24 7.33 0.41<br />
17-Nov-06 5.26 0.29 8.62 0.52 13.88 0.81<br />
20-Nov-06 12.60 0.73 1.62 0.10 14.23 0.83<br />
21-Nov-06 12.72 0.74 1.58 0.10 14.30 0.84<br />
22-Nov-06 11.13 0.65 2.66 0.18 13.78 0.83<br />
23-Nov-06 12.22 0.72 2.58 0.19 14.79 0.91<br />
24-Nov-06 10.68 0.65 2.52 0.19 13.19 0.84<br />
27-Nov-06 10.29 0.64 5.38 0.43 15.66 1.07<br />
28-Nov-06 12.26 0.84 8.02 0.67 20.28 1.51<br />
29-Nov-06 15.85 1.15 10.97 0.97 26.82 2.12<br />
30-Nov-06 18.58 1.49 10.50 0.97 29.08 2.46<br />
1-Dec-06 25.82 2.17 8.95 0.87 34.77 3.04<br />
4-Dec-06 23.49 2.05 11.25 1.15 34.74 3.19<br />
5-Dec-06 23.99 2.17 10.29 1.00 34.28 3.17<br />
6-Dec-06 31.79 2.92 6.20 0.57 37.99 3.49<br />
7-Dec-06 35.24 3.23 1.12 0.10 36.36 3.33<br />
8-Dec-06 35.56 3.26 0.01 0.00 35.56 3.26<br />
109
List of top Financees <strong>and</strong> Financiers in CTTL as on Dec 8, 2006<br />
ANNEXURE 4<br />
S. Top 10 Financees Top 10 Financiers<br />
No. Name Quantity Value Name Quantity Value<br />
1 First National Eq. 12,663,200 1,111,943,525KASB <strong>Securities</strong> Ltd 7,094,800 688,787,805<br />
2 Shahid Ali Habib 6,618,500 666,604,870First National Eq. 5,457,300 462,225,080<br />
3 Orix Inv. Bank 7,085,200 578,807,580Orix Inv. Bank 4,965,300 427,138,225<br />
4 Motiwala Sec. 3,925,000 385,214,975Escorts Investment Bank Ltd. 2,789,900 257,324,510<br />
5 Younis Aadhi 1,880,000 181,574,800BMA Capital Management Ltd. 2,255,300 199,444,200<br />
6 Al-Hoqani Sec. 1,500,000 152,925,000Live <strong>Securities</strong> (Pvt.) Ltd. 1,430,400 131,493,270<br />
7 St<strong>and</strong>ard Capital 1,258,100 120,675,810St<strong>and</strong>ard Capital 1,192,400 114,917,850<br />
8 Muhammad Hussain Adhi 123,500 11,353,875Invest & Finance <strong>Securities</strong> 1,020,100 98,373,445<br />
9 Muhammad Anas Kapadia 119,400 10,953,500Firozuddin A. Casim 1,197,100 97,908,220<br />
10 FDM Capital <strong>Securities</strong> 92,000 8,050,000Younis Aadhi 1,039,700 97,586,050<br />
110
Shareholding status as per the last published accounts (June 30, 2005)<br />
ANNEXURE 5<br />
Particulars Shareholders Shareholding % age<br />
Directors, CEO <strong>and</strong> their Spouse & minor children (Name<br />
wise detail)<br />
Mr. Ahmed Jamil Ansari- Chairman 1 11,706,100 23.2944<br />
Mr. Mohammad Ajmal Ansari-Chief Executive 1 1,717,790 3.4183<br />
Mr. Hasan Jamil Ansari 1 4,197,590 8.3529<br />
Mrs. Yuba Jamil Ansari 1 2,085,524 4.1500<br />
Mrs. Maria Jamil Ansari 1 500 0.0010<br />
Mrs. Nuzhat Ikramullah 1 250 0.0005<br />
Mr. Abu Shamim M. Ariff 1 250 0.0005<br />
Associated Company<br />
Interglobe Commerce Pakistan (Pvt) Limited 1 8,050,000 16.0190<br />
Total Ansari Family 55.2366%<br />
NIT & ICP 1 160,000 0.3183<br />
Banks, DFI & NBFI 10 5,359,060 10.6642<br />
Insurance Companies 1 65,000 0.1293<br />
General Public (Local) 2677 10,146,036 20.1900<br />
Modarabas & Mutual Funds 3 1,770,000 3.5222<br />
Others 63 4,994,700 9.9391<br />
Company Total 2763 50,252,800 100.0000%<br />
111
ANNEXURE 6<br />
List of Directors <strong>and</strong> officials of the Company as at June 30, 2005 <strong>and</strong> January 5, 2007 is given below:<br />
STATUS AS AT JUNE 30, 2005<br />
Name of Directors<br />
Mr. Ahmad Jamil Ansari<br />
Mr. Mohammad Ajmal Ansari<br />
Yuba Jamil Ansari<br />
Maria Jamil Ansari<br />
Abu Shamim Muhammad Ariff<br />
Hasan Jamil Ansari<br />
Chief Executive<br />
Mr. Mohammad Ajmal Ansari<br />
Chief Accountant<br />
Mr. Imran Mehmood<br />
Secretary<br />
S.M. Mehbob<br />
Legal Advisor<br />
Ahmed Adnan & Qazi Associates<br />
STATUS AS AT JANUARY 5, 2007<br />
Name of Directors<br />
Mr. Ahmad Jamil Ansari<br />
Mr. Mohammad Ajmal Ansari<br />
Hasan Jamil Ansari<br />
M. Imran Mehmood<br />
General (Rtd.) Safdar Ali Khan<br />
M. Tariq Rangoonwala<br />
Mr. Nadeem Ahmed<br />
112
ANNEXURE 7<br />
113
114
ANNEXURE 8<br />
Given below are two tables A <strong>and</strong> B each showing top 20 Buyer <strong>and</strong> seller Clients respectively in term of<br />
turnover for the period November 7, 2006 to December 8, 2006<br />
Table A showing top 20 Buyer Clients<br />
Client<br />
Code Client Name Member Name Buy Qty<br />
Avg. Buy<br />
Rate<br />
% Contrib.<br />
to Market<br />
FP First Pakistan <strong>Securities</strong> Ltd First National Equities Limited<br />
Al-Hoqani <strong>Securities</strong> & Investment<br />
10,734,800 73.80 14<br />
3 Irfan Mehmood <strong>Corporation</strong> 10,322,000 87.98 14<br />
MAA Muhammad Ajmal Ansari OIBPakistan Limited 10,073,500 80.53 13<br />
AFQ Asim Fayyaz Qureshi OIBPakistan Limited 9,059,500 84.66 12<br />
525 Asim Fayaz Qureshi First National Equities Limited 6,954,800 91.81 9<br />
415 Naveed Haider Bukhari Shahid Ali Habib <strong>Securities</strong> (Pvt.) Limited 6,574,500 101.61 9<br />
2220 Mohammad Aqeel Motiwala <strong>Securities</strong> (Pvt.) Ltd 4,000,000 98.29 5<br />
5159 Muhammad Hassan Moosa, Noor Mohammed, Shahzada & Co. 2,400,000 102.04 3<br />
309 First Dawood Inv Bank M. Ayub Younis Aadhi 1,752,000 98.20 2<br />
5 Muhammad Yaseen Amin Siddiq Parekh 1,624,100 69.43 2<br />
1577 Noman Abid & Company 1,500,000 100.20 2<br />
414 Junaid Habib Shahid Ali Habib <strong>Securities</strong> (Pvt.) Limited 1,500,000 97.19 2<br />
487 M Ashraf Khan First National Equities Limited 1,441,700 53.69 2<br />
AFK Mohammed Ashraf Khan OIBPakistan Limited 1,362,000 55.01 2<br />
P190 Abida Nasreen First National Equities Limited 1,357,600 93.44 2<br />
AN Alishba Naz First National Equities Limited 1,264,400 74.32 2<br />
9335 Habib Un Nisa Sherman <strong>Securities</strong> (Pvt.) Limited<br />
Al-Hoqani <strong>Securities</strong> & Investment<br />
1,262,300 62.11 2<br />
30 Huma Younus <strong>Corporation</strong> 690,800 94.20 1<br />
NL Nadeem Ahmed Khan OIBPakistan Limited 615,900 63.16 1<br />
9836 Mr. Mirza Usman Baig Sherman <strong>Securities</strong> (Pvt.) Limited 613,900 56.97 1<br />
115
Table B, presenting top 20 Seller Clients<br />
Client<br />
Code Client Name Member Name Sold Qty<br />
Average<br />
Sale Rate<br />
% Contrib.<br />
to Market<br />
3 Irfan Mehmood Al-Hoqani <strong>Securities</strong> & Investment 10,589,800 71.69 23<br />
MAA Muhammad Ajmal Ansari OIBPakistan Limited 7,139,400 92.81 15<br />
AFQ Asim Fayyaz Qureshi OIBPakistan Limited 5,212,000 101.98 11<br />
FP<br />
First Pakistan <strong>Securities</strong><br />
Limited First National Equities Limited 3,573,800 99.96 8<br />
111043 Naved Bukhari First Capital Equities Limited 2,000,000 84.00 4<br />
B<br />
SP<br />
First Pakistan <strong>Securities</strong><br />
Limited OIBPakistan Limited 1,784,000 86.77 4<br />
The Saudi Pak Indust. & Agrit.<br />
Invest. Company (Pvt) Ltd. OIBPakistan Limited 1,762,000 73.24 4<br />
369 Muhammed Hisar Ansari Foundation <strong>Securities</strong> (Private) Limited 1,526,300 95.73 3<br />
525 Asim Fayaz Qureshi First National Equities Limited 1,452,000 99.03 3<br />
5 Muhammad Yaseen Amin Siddiq Parekh 1,426,100 76.09 3<br />
9335 Habib Un Nisa Sherman <strong>Securities</strong> (Pvt.) Limited 1,350,800 66.59 3<br />
210011 Suleman Saeed Al-Hoqani First Capital Equities Limited 1,126,000 68.37 2<br />
810500 Asim Mehmood First Capital Equities Limited 1,101,000 79.84 2<br />
AN Alishba Naz First National Equities Limited 1,073,400 78.47 2<br />
555 The Bank Of Khyber OIBPakistan Limited 1,058,200 93.09 2<br />
415 Naveed Haider Bukhari Shahid Ali Habib <strong>Securities</strong> (Pvt.) Ltd. 1,001,100 92.59 2<br />
AB Pak-Oman Investment Co Ltd OIBPakistan Limited 1,001,000 97.19 2<br />
CC0640 Arif Habib <strong>Securities</strong> Arif Habib Limited 977,500 93.75 2<br />
5211 Nabila Qadir Dalal <strong>Securities</strong> Limited 696,600 71.02 2<br />
74 Orix Investments Bank Pak LtdOIBPakistan Limited 688,200 97.33 1<br />
116
PRE-OPEN SESSION ANALYSIS<br />
ANNEXURE 9<br />
While analyzing Pre-order order level data, instances were found where it appears that price of the<br />
scrip may have been influenced by the identified Clients by putting orders in bulk quantities at upper<br />
<strong>and</strong> lower locks on various trading days. Following are some instances:<br />
Total<br />
Total<br />
Order Qty No. of Orders Buy/ Queued Market<br />
Date Open Close Client Name<br />
Lot orders Qty Sale Price Turnover<br />
8-Dec 87.5 83.15 Naveed Haider Bukhari 250,000 10 22,500,000 Sale 83.15 75,600<br />
7-Dec 92.1 87.5 M. Ashraf Khan 250,000 6 1,500,000 Sale 87.5 322,,700<br />
7-Dec 92.1 87.5 First National Eq. Ltd 250,000 8 2,000,000 Sale 87.5 322,700<br />
7-Dec 92.1 87.5 First Pakistan Sec Ltd A/c<br />
IM<br />
4-Dec 97.2 101.95 Irfan Mehmood<br />
200,000 10 2,000,000 Sale 87.5 322,700<br />
200,000 7 Buy<br />
100,000 1 1,500,000 Buy<br />
102.5 15,554,200<br />
4-Dec 97.2 101.95 Naveed Haider Bukhari 200,000 16 3,200,000 Buy 102.5 15,554,000<br />
4-Dec 97.2 101.95 First Pakistan Sec Ltd A/c<br />
IM<br />
100,000 3 300,000 Buy<br />
200,000 8 1,600,000 Buy 102.05<br />
15,554,000<br />
1-Dec 92..60 97.2 Irfan Mehmood 200,000 10 2,000,000 Buy 97.2 15,376,600<br />
1-Dec 92..60 97.2 Asim Fayyaz Qureshi 200,000 8 1,600,000 Buy 97.2 15,376,600<br />
1-Dec 92..60 97.2 First Pakistan Sec Ltd A/c<br />
IM<br />
200,000 7 1,400,000 Buy 97.2 15,376,600<br />
1-Dec 92..60 97.2 Abida Nasreen 200,000 5 1,000,000 Buy 97.2 15,376,600<br />
30-Nov 88.2 92.6 Irfan Mehmood 200,000 10 2,000,000 Buy 92.6 4,568,500<br />
30-Nov 88.2 92.6 Asim Fayyaz Qureshi 200,000 5 1,000,000 Buy 92.6 4,568,500<br />
30-Nov 88.2 92.6 First Pakistan Sec Ltd A/C<br />
IM<br />
200,000 9 1,800,000 Buy<br />
125,000 1 125,000 Buy<br />
92.6 4,568,500<br />
29-Nov 84 88.2 Irfan Mehmood 250,000 1 250,000 Buy 88.2 10,518,600<br />
29-Nov 84 88.2 Asim Fayyaz Qureshi 200,000 10 2,000,000 Buy 79.8 10,518,600<br />
29-Nov 84 88.2 Alishba Naz 300,000 2 600,000 Buy 80-81 10,518,600<br />
28-Nov 80 84 Irfan Mehmood 250,000 13 3,250,000 Buy 84 7,204,000<br />
27-Nov 76.2 80 Irfan Mehmood 300,000 10 3,000,000 Buy 80 2,890,300<br />
27-Nov 76.2 80 First Pakistan Sec Ltd A/c<br />
IM<br />
27-Nov 76.2 80 Abida Nasreen<br />
300,000 7 2,100,000 Buy<br />
100,000 1 100,000 Buy 80<br />
250,000 2 800,000 Buy<br />
300,000 1<br />
Buy<br />
2,890,300<br />
80 2,890,300<br />
24-Nov 72.6 76.2 Irfan Mehmood 250,000 8 2,000,000 Buy 76.2 1,839,500<br />
24-Nov 72.6 76.2 Asim Mehmood 200,000 2 400,000 Buy 76.2 1,839,500<br />
24-Nov 72.6 76.2 Habib-un-Nisa 250,000 2 500,000 Buy 76.2 1,839,500<br />
117
24-Nov 72.6 76.2 First Pakistan Sec Ltd A/C<br />
IM<br />
300,000 8 2,400,000 Buy 76.2 1,839,500<br />
23-Nov 69.15 72.6 Irfan Mehmood 300,000 8 2,400,000 Buy 72.6 1,996,800<br />
22-Nov 65.9 69.15 Muhammad Yasin<br />
22-Nov 65.9 69.15 Abida Nasreen<br />
300,000 1 Buy<br />
200,000 1 Buy<br />
100,000 3 800,000 Buy 69.15<br />
300,000 3 Buy<br />
100,000 1 1,000,000 Buy 69.15<br />
1,614,700<br />
1,614,700<br />
21-Nov 62.8 65.9 Irfan Mehmood 250,000 12 3,000,000 Buy 65.9 586,100<br />
17-Nov 57 59.85 Irfan Mehmood 250,000 1 250,000 Buy 58.9 12,585,300<br />
118
ANNEXURE 11<br />
Relevant text of the various laws is given hereunder where we have prima facie evidence that potential<br />
violation of various laws including but not limited to the following, took place:<br />
i) Insider Trading<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A- Prohibition on stock exchange deals<br />
by insiders<br />
“No person who is, or has been, at any time during the preceding six months, associated with a<br />
company shall, directly or indirectly, deal on a stock exchange in any listed securities of that or any<br />
other company or cause any other person to deal in securities of such company, if he has information<br />
which-<br />
a) is not generally available;<br />
b) would, if it were so available, be likely to materially affect the price of those securities; or<br />
c) relates to any transaction (actual or contemplated) involving such company.<br />
Explanation.- For the purpose of this section, the expression “associated with” shall mean a<br />
person associated with a company, if he-<br />
(i) is an officer or employee of that company or an associated company; or<br />
(ii) occupies a position which gives him access thereto by reason of any professional or<br />
business relationship between him or his employer or a company or associated company<br />
of which he is a director.”<br />
• Listed companies (Prohibition of Insiders Trading Guidelines, Guideline), Clause 3-<br />
Prohibition on dealing, communicating or counseling by insiders<br />
“No person who is or has been, at any time during the preceding six months associated with a<br />
company shall:<br />
i. either on his own behalf or on behalf of any other person, deal in securities of a company listed<br />
on a stock exchange on the basis of any unpublished price sensitive information; or<br />
ii. communicate any unpublished price sensitive information to any person, with or without his<br />
request for such information, except as required in the ordinary course of business or under<br />
any law; or<br />
iii. counsel or procure any other person to deal in securities of any company on the basis of<br />
unpublished price sensitive information.”<br />
ii) Price Manipulation, wash trades, market manipulation<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) Prohibition of fraudulent acts, etc.<br />
119
“No person shall, for the purpose of inducing, dissuading, effecting, preventing or in any manner<br />
influencing or turning to his advantage, the sale or purchase of any security, directly or indirectly,-<br />
(e) do any act or practice or engage in a course of business, or omit to do any act which operates or<br />
would operate as a fraud, deceit or manipulation upon any person, in particular-<br />
(i) make any fictitious quotation;<br />
(ii) create a false <strong>and</strong> misleading appearance of active trading in any security;<br />
(iii) effect any transaction in such security which involves no change in its beneficial ownership;<br />
(iv) enter into an order or orders for the purchase <strong>and</strong> sale of security which will ultimately<br />
cancelout each other <strong>and</strong> will not result in any change in the beneficial ownership of such security;<br />
(v) directly or indirectly effect a series of transactions in any security creating the appearance of<br />
active trading therein or of raising of price for the purpose of inducing its purchase by others or<br />
depressing its price for<br />
the purpose of inducing its sale by others;<br />
(vi) being a director or an officer of the issuer of a listed equity security or a beneficial owner of not<br />
less than ten per cent of such security who is in possession of material facts omit to disclose any<br />
such facts while buying or selling such security.<br />
iii) Substantial acquisition of shares in excess of 10%, <strong>and</strong> 25% without disclosure<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ord, 2002-<br />
Section-4, Acquisition of more than ten percent voting shares of a company.<br />
“(1) Any acquirer who acquires voting shares, which (taken together with voting shares, if any,<br />
held by the acquirer) would entitle the acquirer to more than ten per cent voting shares in a listed<br />
company, shall disclose the aggregate of his shareholding in that company to the said company <strong>and</strong><br />
to the stock exchange on which the voting shares of the said company are listed as provided in subsection<br />
(2).”<br />
And Section-5, Additional acquisition of voting shares<br />
“ (1) No person shall, directly or indirectly, acquire—<br />
a) voting shares, which (taken together with voting shares, if any, held by such person) would<br />
entitle such person to more than twenty five per cent voting shares in a listed company; or<br />
b) control of a listed company,<br />
unless such person makes a public announcement of offer to acquire voting shares or control of<br />
such company in accordance with this Ordinance.<br />
(2) Before making announcement under sub-section (1), such person shall make disclosure in the<br />
manner specified in section 4.”<br />
iv) Companies Ordinance 1984- S-222 Submission of statements of beneficial owners of listed<br />
securities, <strong>and</strong> S-224 Trading by directors, officers <strong>and</strong> principal shareholders.<br />
120
Section 222 (c) of the Companies Ordinance provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on<br />
Form-32 for change in its shareholding, within 15 days of the change.<br />
Section 224(1) provides that where any director, chief executive …. beneficial owner of more than<br />
ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong> purchase,…. with in a<br />
period of less than six months…. shall make a report <strong>and</strong> tender the amount of such gain to the<br />
company <strong>and</strong> simulateneously sensd <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission.<br />
vi) Broker acted in collusion with the clients to manipulate the price, undertook market<br />
manipulations <strong>and</strong> moreover active party to insider trading being perpetuated by CEO & CFO<br />
of CTTL.<br />
• Brokers <strong>and</strong> Agents Registration Rules, 2001- R-12 Brokers to abide by code of conduct<br />
which specifically states that they shall not violate any law of the l<strong>and</strong>.<br />
A broker holding a certificate of registeration under these rules shall abilde by the code of conduct<br />
specified in the Third Schedule.<br />
iii) KSE Regulations with respect to Short Selling under Ready Market 2002, KATS Regulations<br />
<strong>and</strong> General Rules & Regulations of KSE<br />
17(a) of KATS Regulations states – “A member shall be responsible for all orders entered from his<br />
trading workstation(s).”<br />
121
MOHAMMAD AJMAL ANSARI<br />
Annexure 10A
MOHAMMAD AJMAL ANSARI<br />
Annexure 10A
ASIM FAYYAZ QUERSHI<br />
Annexure 10B
NAVEED HAIDER BUKHARI<br />
Annexure 10C
NAVEED HAIDER BUKHARI<br />
Annexure 10C
MUHAMMAD ASHRAF KHAN<br />
Annexure 10D
IRFAN MAHMOOD<br />
Annexure 10E
IRFAN MAHMOOD<br />
Annexure 10E
FIRST PAKISTAN SECURITIES LIMITED<br />
Annexure 10F
FIRST PAKISTAN SECURITIES LIMITED<br />
Annexure 10F
MUHAMMAD HASSAN<br />
Annexure 10G
JUNAID HABIB<br />
Annexure 10H
ANNEXURE 11<br />
Relevant text of the various laws is given hereunder where we have prima facie evidence that potential<br />
violation of various laws including but not limited to the following, took place:<br />
i) Insider Trading<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, Section 15A- Prohibition on stock exchange deals<br />
by insiders<br />
“No person who is, or has been, at any time during the preceding six months, associated with a<br />
company shall, directly or indirectly, deal on a stock exchange in any listed securities of that or any<br />
other company or cause any other person to deal in securities of such company, if he has information<br />
which-<br />
a) is not generally available;<br />
b) would, if it were so available, be likely to materially affect the price of those securities; or<br />
c) relates to any transaction (actual or contemplated) involving such company.<br />
Explanation.- For the purpose of this section, the expression “associated with” shall mean a<br />
person associated with a company, if he-<br />
(i) is an officer or employee of that company or an associated company; or<br />
(ii) occupies a position which gives him access thereto by reason of any professional or<br />
business relationship between him or his employer or a company or associated company<br />
of which he is a director.”<br />
• Listed companies (Prohibition of Insiders Trading Guidelines, Guideline), Clause 3-<br />
Prohibition on dealing, communicating or counseling by insiders<br />
“No person who is or has been, at any time during the preceding six months associated with a<br />
company shall:<br />
i. either on his own behalf or on behalf of any other person, deal in securities of a company listed<br />
on a stock exchange on the basis of any unpublished price sensitive information; or<br />
ii. communicate any unpublished price sensitive information to any person, with or without his<br />
request for such information, except as required in the ordinary course of business or under<br />
any law; or<br />
iii. counsel or procure any other person to deal in securities of any company on the basis of<br />
unpublished price sensitive information.”<br />
ii) Price Manipulation, wash trades, market manipulation<br />
• <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> Ordinance 1969, S-17(e) Prohibition of fraudulent acts, etc.<br />
1
“No person shall, for the purpose of inducing, dissuading, effecting, preventing or in any manner<br />
influencing or turning to his advantage, the sale or purchase of any security, directly or indirectly,-<br />
(e) do any act or practice or engage in a course of business, or omit to do any act which operates or<br />
would operate as a fraud, deceit or manipulation upon any person, in particular-<br />
(i) make any fictitious quotation;<br />
(ii) create a false <strong>and</strong> misleading appearance of active trading in any security;<br />
(iii) effect any transaction in such security which involves no change in its beneficial ownership;<br />
(iv) enter into an order or orders for the purchase <strong>and</strong> sale of security which will ultimately<br />
cancelout each other <strong>and</strong> will not result in any change in the beneficial ownership of such security;<br />
(v) directly or indirectly effect a series of transactions in any security creating the appearance of<br />
active trading therein or of raising of price for the purpose of inducing its purchase by others or<br />
depressing its price for<br />
the purpose of inducing its sale by others;<br />
(vi) being a director or an officer of the issuer of a listed equity security or a beneficial owner of not<br />
less than ten per cent of such security who is in possession of material facts omit to disclose any<br />
such facts while buying or selling such security.<br />
iii) Substantial acquisition of shares in excess of 10%, <strong>and</strong> 25% without disclosure<br />
• Listed Companies (Substantial Acquisitions of voting shares <strong>and</strong> takeovers) Ord, 2002-<br />
Section-4, Acquisition of more than ten percent voting shares of a company.<br />
“(1) Any acquirer who acquires voting shares, which (taken together with voting shares, if any,<br />
held by the acquirer) would entitle the acquirer to more than ten per cent voting shares in a listed<br />
company, shall disclose the aggregate of his shareholding in that company to the said company <strong>and</strong><br />
to the stock exchange on which the voting shares of the said company are listed as provided in subsection<br />
(2).”<br />
And Section-5, Additional acquisition of voting shares<br />
“ (1) No person shall, directly or indirectly, acquire—<br />
a) voting shares, which (taken together with voting shares, if any, held by such person) would<br />
entitle such person to more than twenty five per cent voting shares in a listed company; or<br />
b) control of a listed company,<br />
unless such person makes a public announcement of offer to acquire voting shares or control of<br />
such company in accordance with this Ordinance.<br />
(2) Before making announcement under sub-section (1), such person shall make disclosure in the<br />
manner specified in section 4.”<br />
iv) Companies Ordinance 1984- S-222 Submission of statements of beneficial owners of listed<br />
securities, <strong>and</strong> S-224 Trading by directors, officers <strong>and</strong> principal shareholders.<br />
2
Section 222 (c) of the Companies Ordinance provides that every director, chief executive, company<br />
secretary, auditors, managing agent, chief accountant <strong>and</strong> more than 10% shareholder of a listed<br />
company shall submit to the registrar <strong>and</strong> the Commission a return of beneficial ownership on<br />
Form-32 for change in its shareholding, within 15 days of the change.<br />
Section 224(1) provides that where any director, chief executive …. beneficial owner of more than<br />
ten percent….. make any gains by the purchase <strong>and</strong> sales, or the sale <strong>and</strong> purchase,…. with in a<br />
period of less than six months…. shall make a report <strong>and</strong> tender the amount of such gain to the<br />
company <strong>and</strong> simulateneously sensd <strong>and</strong> intimation to this effect to the registrar <strong>and</strong> the<br />
Commission.<br />
v) Broker acted in collusion with the clients to manipulate the price, undertook market<br />
manipulations <strong>and</strong> moreover active party to insider trading being perpetuated by CEO & CFO<br />
of CTTL.<br />
• Brokers <strong>and</strong> Agents Registration Rules, 2001- R-12 Brokers to abide by code of conduct<br />
which specifically states that they shall not violate any law of the l<strong>and</strong>.<br />
A broker holding a certificate of registeration under these rules shall abilde by the code of conduct<br />
specified in the Third Schedule.<br />
iii) KSE Regulations with respect to Short Selling under Ready Market 2002, KATS Regulations<br />
<strong>and</strong> General Rules & Regulations of KSE<br />
17(a) of KATS Regulations states – “A member shall be responsible for all orders entered from his<br />
trading workstation(s).”<br />
3