Suspended brokers: financiers, institutions agree to buy shares at 12.5% discount

[Naveed Yaseen]

AHMED MALIK
KARACHI (December 26 2008): Eventually the government had to intervene to address the systematic risk in the equity market by getting the financiers and financees come to terms under a formula whereby brokers facing suspension will be allowed to square off their contracts, under the Continuous Funding System (CFS). Both the financiers and government-managed institutions will equally share the burden after a hair cut of 12.5 percent on last closing prices.

The decision was taken at a meeting held here on Thursday. Advisor to Prime Minister on Finance, Shaukat Tarin, Secretary Finance Dr Waqar Masood Khan, Securities and Exchange Commission of Pakistan Chairman Razi-ur-Rehman Khan, Mutual Fund Association of Pakistan (Mufap) President Najam Ali, National Investment Trust (NIT) Chairman Tariq Iqbal Khan, National Clearing Company of Pakistan Limited (NCCPL) Chairman Aliuddin Ansari and MD Muhammad Luqman, Karachi Stock Exchange Directors Shehzad Chamdia and Sohail Dayala, representatives of Faysal Bank Naveed Khan and representative of litigant Dawood Jan Muhammad attended the meeting.

Sources said that the total CFS outstanding amount stood at around Rs 9.8 billion, out of which an amount of Rs 2.8 billion had already been settled. With a normal procedure, the 110 brokers will be able to get a loan of Rs 50 million each from Investors' Protection Fund and they would pay their outstanding amount of Rs 2 billion. The remaining amount of outstanding CFS share would be around Rs 5 billion and the total losses to buy shares at 12.5 percent discount have been estimated at around Rs 600 to Rs 650 million.

Sources said that the financiers gave proposal to buy the shares of suspended brokers on 15 percent discount, while the financees proposed to sell out their shares on 10 percent discount. After discussion, the meeting agreed to fix 12.5 percent discount than Wednesday's closing price.

It was also decided that the lawyers of plaintiffs would request the court to postpone the hearing of their appeal on CFS issue till Monday as they are in settlement process with the defendants. It is also learnt that another meeting would be held on Friday to finalise the modalities and procedure to implement the decision. KSE MD Adnan Afridi, NCCPL Chairman Aliuddin Ansari, Mufap President Najam Ali and representative of litigant Dawood Jan Muhammad would attend the meeting.

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