‘Booked’ building: SECP directs KSE to probe alleged wrongdoing KARACHI: The apex regulator of the country’s capital market has directed the Karachi Stock Exchange (KSE) to investigate alleged wrongdoing in the book-building portion of Saif Power Limited’s listing. Speaking to The Express Tribune on Thursday, the spokesperson for the Securities and Exchange Commission of Pakistan (SECP) confirmed that it has sought a report from the KSE about the alleged manipulation in the book building of Saif Power, which was held earlier this week. The KSE-led inquiry will follow complaints by at least two brokerage houses and one investment bank that the book-building process was marred by ‘massive manipulation’ and procedural irregularities on part of the book-runner. Arif Habib Limited, a Karachi-based brokerage, serves as the book-runner to the offer, which consists of 48.3 million ordinary shares, representing 12.5% of Saif Power’s paid-up capital. A little over 36.2 million shares – 75% of the offer size – were obtainable through the book-building process to institutional and high net worth individuals on Tuesday while the rest of the offer size will be offered to the general public later on. Unlike past offers for companies’ sale of shares that carried only a floor price, the book-building process for Saif Power involved a price band ranging from Rs18 per share to Rs30 per share. In other words, bidders were bound to place bids at less than Rs30 per share. Speaking on the condition of anonymity, an investment banker who participated in the bidding process said the whole exercise took place ‘in the absence of any independent checks and control’. “Instead of the pro-rata basis, the book building exercise was carried out on a first-come-first-served basis, which left room for procedural irregularities and manipulation,” he said. However, it should be noted that SECP guidelines for the listing of companies allow this mechanism for book building. He said bidders had to line up outside the book-runner’s office as early in the morning as possible to get a ‘token’ in time. As per the listing regulations, the book-runner is responsible for collecting bid applications and putting serial numbers, date and time on each bidding form at the time of their collection. Insisting that the book-runner failed to observe impartiality while receiving the bids, a broker said it manipulated the process to the advantage of its own clients. “A broker by definition is loyal to his clients. The conflict of interest, particularly when there are few checks and balances, is too apparent,” he said while requesting not to be named. “The book-runner accommodated only those bidders to whom it wanted to give favours.” A spokesperson for Arif Habib Limited said that Saif Power’s book building was conducted in a proper and transparent manner that was in accordance with the rules set out by the regulators. “Arif Habib Limited followed the bidding procedure under the book-building process outlined in the offer for sale document of Saif Power Limited, which was approved by the KSE and SECP,” the spokesperson said. It should be noted that one director of Saif Power, Osman Saifullah Khan, also serves on the policy board of the SECP. Responding to a question about a possible conflict of interest, the SECP spokesman said it “may not be relevant” because investors’ complaints are about alleged wrongdoing by Arif Habib Limited, and not Saif Power Limited.
Posted on: Fri, 03 Oct 2014 01:14:42 +0000
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