SECP blamed for collateral blunder in massive leasing scam.
Tariq Khattak
ISLAMABAD: (Sept 30)
Seventeen years after Natover Lease and Refinance Limited (NLRL) was declared a “sick” company, thousands of depositors remain uncompensated despite Rs 700 million collected through fraudulent deposit schemes between 2003 and 2006. The company’s owner, Nadeem Sheikh, allegedly diverted the funds to personal accounts after promising 18 percent returns.
A 2011 Senate investigation placed primary responsibility on the Securities and Exchange Commission of Pakistan (SECP), finding that Natover collected Rs 372 million illegally without authorization and that Sheikh transferred amounts from subsidiary Natover International Private Limited into personal accounts. The inquiry also revealed SECP accepted land in Badin as collateral without verification, which was later discovered to be submerged by the sea, exposing regulatory negligence.
The National Accountability Bureau arrested Sheikh but nothing substantial can be gained. Analysts say the lack of accountability illustrates how systemic gaps in Pakistan’s non-banking financial sector allow financial crimes to persist for decades.
Allegations have also linked SECP officials from a powerful Bhatti Group, to oversight failures in the scam. These allegations remain unverified, but critics argue that the absence of action against regulators undermines confidence in reforms. SECP has not responded to requests for updates on prosecutions, depositor compensation mechanisms, or actions taken against officials believed to be involved.
The financial impact on depositors is far greater than the original Rs 700 million. Adjusted for inflation, the amount would be worth about Rs 1.7 billion today. If invested in government securities at prevailing rates, the opportunity cost exceeds Rs 3 billion. Many elderly investors have since passed away, leaving heirs to pursue complex legal claims that continue to erode in value as inflation rises.
While current regulations require non-banking finance companies to hold valid SECP licenses, obtain explicit permission for deposit collection, and maintain minimum investment-grade ratings, market observers note enforcement remains uneven. The Natover case continues to test the regulator’s credibility and raises urgent questions about Pakistan’s ability to protect small investors.
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