KARACHI (October 26 2003): The Securities and Exchange Commission of Pakistan (SECP) has further clarified the amendments made to the companies (Invitation and Acceptance of Deposit) Rules 1987, which, it said, had been given a final shape after inviting public comments and discussions with the automobile industry.
In an explanatory note on the amendment to the companies rules, the SECP said if a company launches a campaign (through electronic/print-media) to attract deposits from the public against the supply of property or commodity, which is not in its possession or it does not have adequate production facilities for its supply or it gives an unusual incentive prompting early deposits, it would attract the provisions of the new rules.
SECP, however, may grant exemption to companies on the recommendation of their trade organisation concerned, it added.
Applicability of Acceptance of Deposit Rules means that such companies would have to get every advertisement inviting public to deposit money with it, approved by the SECP.
While requirements for a prospectus would become applicable to such advertisements, the companies must ensure that these deposits shall always be kept within the limits laid down in the rules prescribed in 1987.
The spirit of recent amendment to rules is that, on the one hand, self-regulatory organisation of concerned industries should be strengthened, and made responsible for regulating the activities of their members and, on the other hand, the interest of the investors/purchasers is protected.
The amendment to the rules was made in view of the activities of certain companies in automobiles and real estate development business. A few examples include the Nayadaur Motors (Pvt) Limited, which collected Rs 919 million from the general public on booking of Kia Pride cars, the Carrageen Corporation (Pvt) Limited, which collected Rs 49.085 million, the Pakland Housing (Pvt) Limited, which collected Rs 20 million, the SSR & Company (Pvt) Limited, which collected Rs 1.635 million, the Saif Nadeem Kawasaki Motors Limited, which collected huge deposits in 80s, which remains undetermined, the Bahria Town (Pu.) Ltd, a company with paid-up capital of Rs 10,000 only, which has collected deposits in billions.
In addition to these, recently, a company, the Asia Housing (Pvt) Ltd, with paid capital of Rs 2,000, only published full page advertisements in newspapers and then a massive campaign on TV inviting deposits against land.
