ISLAMABAD - The SECP has said that a Chinese regulator is carrying out investigations against a Chinese company and not into Multan Metro Bus project.

The Securities and Exchange Commission of Pakistan (SECP) clarified that China Securities Regulatory Commission (CSRC) had sought assistance from SECP in the matter of its investigation against the Yabaite - the Chinese company - for its violation of Chinese securities laws.

Yabaite Technology Co Ltd is listed on the Shenzhen Stock Exchange in China. During December 2016, CSRC approached the SECP for its assistance limited to the provision of information and certain documents, without sharing all the details of its investigations. This is the standard modus operandi for assistance sought under the International Organisation of Securities Commissions (IOSCO) cooperation protocol (MMOU). Throughout the process, the SECP, its officers and its various departments dealt with the matter with due care, responsiveness and unequivocal objectivity to play its due role as a counterpart supportive member of IOSCO. As such, any impression being created that CSRC is conducting an investigation into Multan Metro Bus project is incorrect and contrary to the facts, as is the accusation that SECP has somehow withheld or delayed the process. The fact is that the CSRC repeatedly has thanked SECP for its support and timely help in this matter.

Accordingly, SECP confirms that the CSRC has sought assistance from SECP in the matter of its investigation against the Yabaite for its disclosure violation of Chinese securities laws. Further, the SECP cannot initiate any investigation in Pakistan unless the CSRC’s on-going investigation has established the violation, which links to companies or individuals in Pakistan. The CSRC’s investigation in the matter is still a work in process and as confirmed by CSRC the administrative sanction proceeding in the matter are not yet complete. SECP has already requested CSRC to share its investigation report. Once SECP receives the CSRC’s investigation report, SECP will be in a position to assess any possible violation of the laws administered by it. SECP has neither delayed any requisite action on its part nor hindered the CSRC investigation process.

As reported by the CSRC, the Yabaite claims that it worked as a sub-contractor of Capital Engineering and Construction Co Ltd awarded to Habib Rafiq (Pvt) Limited in Multan Metro Bus Project. It is to be noted that the Capital Engineering and Construction Co Ltd is not a company incorporated/registered with the SECP. Furthermore, SECP visited the address of the Capital Engineering and Construction Co as reported by CSRC in Pakistan which revealed that no such office exist on the given address.

The CSRC requested SECP’s assistance in obtaining contract, agreement and tender documents and information pertaining to the Multan Metro Bus project. SECP is empowered under section 42D of SECP Act, 1997 to seek and provide assistance to international regulators for assisting in any investigation for contravention of financial services laws and can call production of any information or document from any person on the request of the requesting authority. Such international cooperation requests are, however, subject to confidentiality requirements stipulated under the SECP Act 1997 and the International Organisation of Securities Commission (IOSCO)’s MMoU to which SECP is a signatory.

It is to be noted that the provisions of assistance under MMOU are internationally used by regulators for access to information in cross border enforcement matters for capital markets integrity and protection of investors. SECP after obtaining the CSRC’s authorisation to share certain segments of its request with the concerned authorities/companies in Pakistan - a requirement under the MMoU - initiated gathering the requisite information and documents from the concerned authorities, ie, Punjab provincial government for provision of information from Multan Development Authority (MDA), Pakistan Engineering Council (PEC), State Bank of Pakistan, Federal Board of Revenue and Yabaite Construction Group Co (Pvt.) Limited, the concerned contractors of the project namely; Habib Rafiq Pvt Limited HRL, Matracon Pakistan Pvt Limited. SECP would like to confirm that all the above departments extended their full support in this regard. All information received from MDA, PEC, SBP, Yabaite Pakistan, HRL and Matracon were shared with the CSRC pursuant to the commission’s approvals.

Subsequently, CSRC vide its mail in late July 2017 shared two letters that acknowledge and appreciate the Yabaite China contribution in the Multan Metro Bus Project, purportedly signed by the Punjab chief minister, Senator Kalsoom Parveen, Senator Mushahid Hussain Sayed and dully attested by the official of Ministry of Foreign Affairs. The Yabaite China produced these letters before the CSRC as evidence, in support of its alleged involvement in Multan Metro Bus project. CSRC requested the SECP's assistance in contacting the mentioned persons, verifying their identities, and asking them to answer certain questions.

After soliciting the approval from the commission, letters were sent out to the Punjab chief secretary, Senator Kalsoom Parveen, Senator Mushahid Hussain and MOFA secretary, seeking response to the questions raised by the CSRC and to verify the authenticity of the letters produced by the Yabaite China before the CSRC.

The Punjab chief secretary responded to SECP’s letter and communicated on behalf of the Punjab chief minister that he did not sign the said letter and that his signature is fake/forged or copied. Response was also received from the offices of the Senator Mushahid Hussain Sayed and Senator Kalsoom Perveen, both of whom denied signing of any such letter and advised that the letter is a forgery. The responses on above-referred correspondence with the office of Punjab chief minister, Senator Kalsoom Parveen and Senator Mushahid Hussain Sayed were subsequently shared with CSRC.

It is pertinent to mention here that till-date CSRC has not shared any investigation report in the matter with SECP. However, SECP has written to the CSRC to share its investigations so that involvement of any Pakistan-based company or individual in any wrongdoing can be ascertained at their end.

CSRC has informed SECP that “currently this case is still ongoing and they may not share any information before the final decision of Administration Sanction is reached and made public, and considering the confidentiality and independent nature of CSRC investigation process, they may not share investigation report at any stage”.

Furthermore, they have confirmed that “during the investigation period of this case, the CSRC enforcement staff have never inquired, nor attempted to inquire local officials from Pakistan, or any Pakistani citizens. Even if they may want to obtain inquiry records from Pakistani citizens in the future, they would request for this procedure to be conducted by SECP, as assistance under the IOSCO MMOU”. Finally, they have also confirmed that “based on CSRC’s existing investigation findings, they do not have any evidence showing that Yabaite has any business transactions with claimed Pakistan entities or natural person”.

Based on the above confirmations received from the CSRC on Wednesday, and to ensure complete transparency and a thorough independent investigation into the affair from a Pakistani standpoint, SECP has sent letters to FIA and Punjab government along with the information/documents pertaining to SECP (which have already been shared with Ministry of Finance) with the advice to investigate the matter independently.

Furthermore, available information from CSRC will be shared with FIA and Punjab government after getting permission from CSRC. Moreover, additional information in the matter will be shared with them as and when received from CSRC.