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Indo-Asian News Service (IANS): Thursday, April 7, 2011 SYSTEMIC FAILURE BLAMED FOR


A probe committee said Thursday that systemic failure has allowed massive manipulation of the stock
exchanges in Bangladesh, and also dismissed the view that political involvement led to the repeated
market crashes in December-January.

"All the institutions that have anything to do with the stock market were responsible for the debacle,"
Khondkar Ibrahim Khaled, who headed the probe committee, told reporters about their findings at
Bangladesh Krishi Bank here.

Khaled, a professional banker, submitted the committee's report to Finance Minister A.M.A. Muhith
Thursday, the Star Online reported.

The report cited 15 case studies that showed how the market was heavily manipulated through rigging of
shares by individuals and cartels.

The Priyodesk ( Thursday, April 7, 2011 SHARE-MARKET SCAM: PROBE BODY FOR

The other members of the four-member committee are Director General of Bangladesh Institute of Bank
Management Toufic A Choudhury, former president of the Institute of Chartered Accountants of Bangladesh
Mohammad Abdul Bari and Supreme Court advocate Nihad Kabir.

The Priyodesk ( Thursday, April 7, 2011 INDIVIDUALS' NAMES TO BE DELETED

Individuals' names, which have been mentioned in the probe report on the recent stockmarket debacle, will be
deleted before making it public in 10 to 15 days, Finance Minister AMA Muhith said yesterday.

The Priyodesk ( Friday, April 8, 2011 PROBE REPORT MENTIONS 20 MASTERMINDS


A confidential source based on the probe report said banglanews apart from these twenty some more manipulators
might have been involved in the share scam.

The committee believes more investigation into Mansur Alam’s involvement might make a way to get more names
of big shots who were involved in stock market debacle.
The Priyodesk ( Friday, April 8, 2011 TK 20,000CR SWINDLED

The committee could not ascertain the total amount that was taken out of the stockmarket before its collapse. But
the probe body found out that some money went to private pockets.
“They did this to lure retail investors into buying their shares at high prices. Not one or two individuals, many
groups had done that. They are responsible for making the market volatile,” he said. Khaled said he doesn't think
politics had anything to do with the debacle.
The Daily Star: Saturday, April 9, 2011

STOCKMARKET MANIPULATION: Finger Pointed at 60 Individuals Probe Body Chief Says Suspects'
Names Can Be Made Public

The committee has warned the government high-ups against the influence of market players like pro-AL business
tycoon Salman F Rahman and former DSE president Rakibur Rahman.

“We got the impression after talking to people,” said Khaled, also chairman of Bangladesh Krishi Bank.

He said though the committee has named the individuals as suspects, there are strong grounds for the allegations.
The SEC, however, has to conduct further investigation.

“In the report, we have detailed how the regulator should conduct investigation,” Khaled said. “It [SEC] has to be
completely restructured and its current leadership removed.”

Khaled's comments came a day after the four-member committee submitted its 320-page report to Finance Minister
AMA Muhith.

The probe body also found involvement of opposition-linked influential businessmen and traders in the
stockmarket debacle.

It observed that the SEC will remain ineffective and exposed to manipulations as long as the market players are
able to influence the regulator.

The investigation into the recent bourse debacle found their roles to be under widespread public suspicion.
There have been allegations that the two influenced the SEC and lobbied for the appointment of Ziaul Haque
Khandaker as SEC chairman and reappointment of Mansur Alam as SEC member.

When contacted, Salman, now in London, said he would return home soon and go through the probe report.
“Whatever I did in the stockmarket had the approval of the SEC,” said the influential businessman.

He could not find any reason why the probe committee has warned the government about him. “I will look
into the matter on my return home,” he said.

Rakibur, a DSE director, has denied the allegation of influencing the SEC in any way.

When the stockmarket was on a bullish run, some individual accounts showed high levels of transaction. The
individuals include Golam Mostafa, Abu Sadat Md Sayem, Yakub Ali Khandaker, Syed Sirajuddoula, Md
Kholiluzzaman, Md Shahidullah, Arifur Rahman, and Shoma Alam Rahman, said the report.

The probe found that Roksana Akter, wife of Anwarul Kabir Bhuiyan, traded shares worth a huge sum from her
four accounts in a breach of SEC rules.

Bhuiyan, however, claimed he was unaware of his wife's involvement in share business.

“My wife is not financially dependent on me. She might be involved in stock business,” he said.

Khaled said the SEC rules bar wife, children, parents or dependents of SEC officials from getting involved in share
business. Sunday, April 10, 2011 GO PUBLIC WITH SHARE REPORT: SALMAN

Salman F Rahman, who heads the association for listed companies, says he wants to see the inquiry report on the
share market scam published and all alleged perpetrators named.

Rahman, who has been in the news again following submission of the report on Thursday, told that
naming and shaming the "real culprits" officially would put an end to all speculations and media reports based on
what he said "gossips and hearsay".

"The report of a government instituted inquiry is the property of the government. And it is up to the government to
decide whether to publish a part or full content of the report."

"Those who have made a part of it public may have bordered on criminal liability. Even if it is not criminal, it is
definitely immoral and unethical," he said and demanded the authorities look into the matter.
"The best thing for the government would be to release the report without wasting any more time," he said.

Rahman, who returned home on Saturday night after a private trip abroad, was responding to reports of his alleged
role in the recent share market bubble and then the Dec-Jan burst. Some newspapers referenced the unpublished
inquiry report to claim he was one of those named responsible.

"So far I have read the stories published in a couple of newspapers, they are referring to observations made by the
committee chair," he said on Sunday afternoon. "I haven't seen or read anything (in the report) saying there is
conclusive evidence against any individual."

He however refused to confirm the meeting at the Prime Minister's Office.

The remarks by the finance minister, A M A Muhith, at a press conference on Thursday afternoon led to wild
speculations about the names of individuals and companies mentioned in the inquiry report.

Earlier on Thursday morning, the chief of the four-strong investigation committee, Khondoker Ibrahim Khaled,
immediately after handing the report to Muhith at the latter's Minto Road official home, had told reporters that no
individuals had been named.

Hours later on the same day, speaking at a press conference, the minister said some names had been there and that
he would only publish the report after "deleting the names".

"We need to conduct more investigation (before we make those public)," Muhith told reporters.

Muhith has since come under fire for his remarks from both allies and opponents who have been demanding full
disclosure. Two days later, on Sunday, the finance minister told journalists that he would publish the reports after
"some editing and corrections if necessary" and that he did not support "character assassination".

On Thursday night, Khaled, the inquiry chief, was on TV saying there were "influential" individuals such as
Salman Rahman who were thought to have been playing a role in the decision making process. Khaled said he
developed the perception after talking to various "market players".

"Why does it have to be based on perception? Why not specific allegation and specific proof?" Salman Rahman
retorted when he was asked to respond to Khaled's comment on TV.

The panel called for a drastic overhaul of the Securities and Exchange Commission, blaming the regulator for the
share market crash that led to angry street demonstrations from retail investors.

The Financial Express: Monday, April 11, 2011


Major Beneficiaries

The investigators dealing with share market manipulations said in their report that the stock market's stability
would not be achieved without political commitment at the highest level, only which is capable of eliminating the
'vicious cycle' ruling the market.
Compiled by Saleh Md. Mashehdul Islam, Asstt. Prof. School of Business, AUST. Page 9 of 22
The comment comes after the probe body has identified a myriad of corruptions committed by a section of
powerful businessmen, politicians, stakeholders, key officials, and individual investors.

The probe body said in its report that the recent crash occurred in the market with direct or indirect support
provided by the regulator, the Securities and Exchange Commission (SEC).

When it comes to issuance of preference shares, the probe report said in the last one and half years, the listed
companies desperately issued preference shares. In 2010, eight companies collected Tk
11.82 billion from the stock market through the issuance of preference shares. Among them, the major companies
include Beximco Pharma, Summit Power, Aftab Automobiles and Peoples Leasing.

Summit Power and Peoples Leasing have sucked money from the market by issuing preference shares for only one
month. The companies fixed up the ratio of convertible shares in such a way that the directors can be benefited.
The Daily Star: Tuesday, April 12, 2011 KPCL ALSO UNDER QUESTION

The government probe committee found that financial incentives were behind the scenes in fixing higher indicative
prices of KPCL shares by institutional investors that also resulted in higher issue price through final institutional

The Priyodesk ( Tuesday, April 12, 2011 STOCK PROTECTORS TURNED PREDATORS

Compiled by Saleh Md. Mashehdul Islam, Asstt. Prof. School of Business, AUST. Page 13 of 22
The report added that Shamser should be removed from his post for his illegal involvement in share business as the
chief of AB Investment.

The Daily Star: Wednesday, April 13, 2011

STRONG CARTEL BEHIND SCAM Stocks Probe Report Says Nexus Targeted Primary Market for
Manipulation By Inflating Prices

A strong cartel has used the primary market as a tool to fleece people by inflating share prices, says a probe
committee report.

“The 1996 crash was in the secondary market. But this time it was created in the primary market from behind the
scene by a nexus of the issuer, issue manager, valuer, chartered accountant and placement holder with the SEC's
support,” the report said.

In 2009-10, 34 companies, eight of which were non-listed, raised capital totaling Tk 3,776 crore through private
“The placement business outside the capital market has become a new system for share transaction that is totally
illegal. Taking this opportunity some weak companies through fabricated financial statements raised hundreds of
crores of taka from immature investors,” the report said.

Pubali Bank Securities Limited is one of the institutional investors that bought around Tk 13 crore worth shares of
Unique Hotel and Resorts Ltd and Energy Prima Limited through placement. As the stockbroker's investment got
stuck on the two companies, the bank brokerage house on March 1 sent a letter to the SEC seeking support from
the regulator to get back the investment.

The Daily Star: Wednesday, April 13, 2011

PROBE FINDS MASSIVE STOCK MANIPULATION Regulators’ Bad Decisions Largely Responsible For
Market Volatility, Report Says

The probe committee on share market debacle has made a series of recommendations for a major overhaul of the
Securities and Exchange Commission, including replacement of its current chairman. The committee, which
submitted its report to the finance minister Thursday morning, mentioned in its report 15 case studies showing how
the market was heavily manipulated.

“All the institutions that have anything to do with the stock market were responsible for the debacle,” Khondkar
Ibrahim Khaled, head of the probe committee, said while briefing reporters on their findings at Bangladesh Krishi

The report mentioned bad decisions by the regulators as largely responsible for market volatility. Khaled, also
chairman of Krishi Bank, submitted the report to Finance Minister AMA Muhith at his residence at around 9:30am.
On another query how much money has gone out of the market, the former deputy governor of the central bank
said they did not find the total figure but have identified that some money has gone to private pockets.

He estimated around Tk 4,000 to 5,000 crore to be going to private pockets through direct listing.

On draining out of money from the country, Khaled cited an example of GEM Global Yield Fund Limited, in
collaboration with local company Thai Aluminum, sending around Tk 15 crore abroad.

Detailing further on market manipulation, he said 19 persons from two addresses purchased shares of Tk 19 crore
through private placement.

“How come they are from same addresses?” he questioned, saying there certainly were some irregularities.

On share price scamming in joint collaboration, Ibrahim Khaled said a group of 10 people made a verbal deal with
another 10-member group. They sold and purchased their shares sending the prices high only to sell out the whole
chunk in the market at a very high price later.

“Not only one or two individuals, many groups have worked this way. They are responsible for making the market
volatile,” he said.

Terming book building as the best method in the share market, Ibrahim Khaled said it was not used in the sector

The other members of the four-member committee are Director General of Bangladesh Institute of Bank
Management Toufic A Choudhury, former president of the Institute of Chartered Accountants of Bangladesh
Mohammad Abdul Bari and Supreme Court advocate Nihad Kabir.

The committee, formed on January 25, was given 3 months to prepare the report. It, however, finished the report
nearly a month before the deadline.

The government formed the committee following massive falls in share prices for days in a row prompting
thousands of small investors to take to the streets in protest.

The probe body was given 11 tasks including finding out if any individual or groups had influenced the market or
taken any undue advantages.

According to its terms of reference, the committee would find the reasons behind the overpricing of shares over the
last two years. It would also identify the people and the institutions that withdrew unusually high amount of money
taking advantage of the overpriced market through direct listing, book building and fixed price.

The number of beneficiary owners (BO) account in the stock market is about 32 lakh.

The Daily Star: Thursday, April 14, 2011

CMC-KAMAL STOCK SCAM Share Value 16 Times Inflated

Share price of CMC-Kamal Textile Mills was sixteen times its face value in 2010 although the company suffered
loss in the previous year, the probe committee on stockmarket debacle has found.

Compiled by Saleh Md. Mashehdul Islam, Asstt. Prof. School of Business, AUST. Page 17 of 22
The company suffered a loss of Tk 40 lakh in first quarter of 2009 when its earning per share was Tk
2.61 the negative.

CMC-Kamal, however, declared 10 percent dividend for the shareholders at the end of 2009, according to a case
study of the probe committee.

In the first quarter of 2010, the share value skyrocketed to Tk 1,600 -- sixteen times the face value. Thanks to
the overheated share prices, company's directors made huge money.

Of them, Company Chairman AHM Mustafa Kamal, an Awami League lawmaker, sold shares of Tk
3.05 crore and Ms Kashmiri Kamal of Tk 2.32 crore, Nafisa Kamal of Tk 13.66 crore, Kashfi Kamal of Tk 99.5
lakh, and Golam Sarwar of Tk 59.8 lakh -- all company directors and family members of Kamal.

Even though the probe committee has evidence that Mustafa Kamal did sell shares in the overheated market,
Kamal said: "I didn't sell shares when the price went up."

"There is no allegation against me and my company in the probe report," said Kamal, also chief of the
parliamentary standing committee on finance ministry.

Kamal said SABINCO, a joint venture of Bangladesh and Saudi Arab governments, has 20 percent share in the
company while he has 40 percent share.

But, the website of Lotus-Kamal Group yesterday showed: "50 percent share of the company is owned by the
general public and different financial institutions and 50 percent by Mr Kamal and his family members."

Of the 20 percent share owned by SABINCO -- Saudi-Bangladesh Industrial and Agricultural Investment
Company Limited -- the Bangladesh government owns 15 percent share. The probe committee held the following
responsible for the overheated price of CMC Kamal's share: Declaration of 10 percent stock dividend;

Declaration of Tk 70 lakh net profit in the first quarter of 2010; Change of face
value of the company's share to Tk 10 from Tk 100;

Upgrading the company's status to category A from Z following the declaration of 10 percent dividend;

The company offered right shares at the ratio of 2:1 of Tk 17.5 each including a premium of Tk 7.5 to increase its
paid-up capital;

The company proposed to increase paid-up capital to Tk 200 crore from Tk 50 crore; On September 20, 2010, it
revalued its land and factory building. After the revaluation, its land value stood at Tk 33 crore, up from Tk 1.55
crore, and the building value stood at Tk 20 crore, up from Tk
6.13 crore; and

In the same year, the company declared Tk 3.1 crore net profit after tax.
The Daily Star: Thursday, April 14, 2011 THIRD EYE: CAPITAL MARKET WOES

Mamun Rashid

Knowing that I am a banker and can very much appreciate price earning ratio, earning per share, direct listing,
book building or more importantly underlying fundamentals of a stock, a lot of my golfing friends at Kurmitola
Golf Club would ask me what to buy or what to hold on to or sell. The story tells me; almost one out of three
persons in this target market has got something to do with investment in traded stocks.

Almost a year ago, a filmmaker asked me about increasing his investment in "pre Initial Public Offering (IPO)
private placements" without even knowing when the IPO would be placed for approval of the regulator or floated,
and requested me to help him invest more in upcoming private placement opportunities as he thought he should
concentrate more on capital market rather than "box office hits."

Though I spent almost 10 years in global market environment with two leading British and Australian banks before
joining a US banking giant, the very issue of "maintaining the firewall philosophy" didn't allow me to explore
investment opportunities in Dhaka traded stocks during the last 10 years, when the Beneficiary Owner (BO)
account came into being.

Yes, I could have done this with approval from Hong Kong and New York, but like many I decided to drop this
mainly to avoid conflict between my personal interest and the company's interest in an emerging country.
However, upon request I would "donate knowledge" on investing in fundamentally strong stocks, especially in the
infrastructure and financial sectors. However I can't claim that my suggestions were very fruitful. I was
dumbfounded to see more money being put on junk shares rather than the ones with good fundamentals.

My friends took me as mediocre when they got my advice regarding Khulna Power (most profitable and reliable
private sector power plant, and with increasing their capacity too), Brac Bank (the fastest growing SME bank in the
country), Eastern Bank (gone through a rigorous change process and now making good money) or Prime Bank
(strong bank with growing capital base), which didn't turn out to be rewarding for them.

During my India stint, I saw that almost one out of two colleagues had an individual portfolio to manage. And that
is exactly what an intelligent person is supposed to do. It was good to see more and more individual investors in
Bangladesh getting engaged in the capital market and, more importantly, the lower-income group generating
surplus cash despite the inflationary effects. But one should also remember that bad investment choices are only as
good as never-earned income.

The capital market is the engine of growth for an economy. It performs a critical role as an intermediary between
savers and companies seeking additional financing for business expansion. It was very encouraging to see that the
capital market of Bangladesh is growing and the market cap reaching as high as $54 billion, with a daily turnover
of around $300 million.

However, the story doesn't end here. As the market grows we compromise on the moral side with random
regulatory failures. In absence of a tight-packed or dynamic guideline, the manipulators kept on playing their cards
like in the mid-nineties. One does not know what will get a merchant bank or asset management company license
approved, or is it a crime to invest a large sum in private placements? The regulators didn't do anything forward-
looking, other than riding on day- to-day transactions. They didn't even learn anything from the neighbours or do
anything aggressive to address the supply-side constraints.
As mentioned, there are firms listed in the stock exchange that have historically strong financials, stable earnings,
more or less quality management, and new projects that are expected to drive their future growth. These firms also
operate in the most lucrative industry or business segments -- power, telecommunications and the like. Stock price
embeds, among others, public confidence in management, forecast of future earnings of the firm, governance and
of course perception. But that logic does not seem to be working here.

Despite talk about lack of confidence and mismanagement, perceived "no prospects," weak governance, etc., prices
are going up, even for some state-owned enterprises. Now the enquiry committee is telling us that there were
deliberate efforts from a section of operators to command the market their way, in absence of definitive tools
applied by the regulators. They were either blind or incapable. Accountants, and even "price sensitive information
advertisements," were used to hike up prices of junk shares, especially where the volumes traded or IPO amount
was small.

AK Khan & Company invested larges sum in Grameenphone pre-IPO because there is no law or guideline to bar
them from investing in private placements. GEM funds made a lot of money from small investments, because
investment in BD Thai shares (which jumped many-fold in a short time) came out to be very attractive. Since they
invested in secondary shares, no "lock in period" was applied on them (though there were issues with regard to
their ultimate ownership and business model), and that has been the case everywhere.

I am sure the enquiry committee could see who were allowed to float shares on "Direct Listing" basis at the fag end
and how the tight-packed "Book building" method was abused by the issuers in connivance with institutional
investors. "Too much money exchanging hands" was hard to avoid by someone having some stake in the process
of issuance, approval, pressure group or sleeping partners. We have burnt our fingers. The worst affected are the
small investors, though everybody seems to be stuck somewhere and are searching for an exit route. There has
been too much simplification and narrow discussions. Investment in capital market is never bad, having a BO
account can be a symbol of intelligence, or a "must have" for any enterprising person.

Making money is a forward march towards national wealth creation, provided we are focused on the "how" side of
this. Appropriate guidelines with progressive enforcement can help us to move on. However, we have to play the
game properly.

The Daily Star: Saturday, April 16, 2011


Split of shares used as a tool to sweep up small investors' money had been a major reason behind the massive price
inflation on the stockmarket, said the government probe committee on the recent market debacle.

Market capitalisation of the companies, which split their shares between July 2009 and December 2010, soared by
655 percent, and that of those which did not split shares went up by 46 percent at the same time, found the four-
member committee headed by Khondkar Ibrahim Khaled.

Manipulators played on the "psychological weakness" of retail investors and encouraged them to buy lower
denominated shares that had a huge impact on the stockmarket, said the probe report.

"Split of shares does not have any impact on a company's earnings or assets. So, there should have been no impact
of the split on share prices except for an adjustment to the face value."
This fragmentation of shares had an "unexpected impact" on share prices and liquidity in the market, it said.

Market capitalisation of companies that did not split shares was three times higher than the companies that split
shares until July 2, 2009. But market capitalisation of companies, which split shares, doubled compared to the ones
that did not between July 2009 and December 2010, the committee found.

At least 62 companies denominated their shares from Tk 100 to Tk 10 with the Prime Finance and Investment Ltd
being the first company to announce Tk 10 denomination shares on July 9, 2009. Of the companies, almost half is
from the financial sector, the report said.

Split of shares affected the circuit breaker on share price movement, the probe body said.

In order to control price movement, the circuit breaker threshold remains low, if the share price slab is high.

"The circuit breaker threshold is 20 percent for shares worth up to Tk 200, while it is 7.5 percent for shares worth
above Tk 5,000. Split shares caused share prices and market capitalisation to soar rapidly as low-denomination
shares require imposition of a higher circuit breaker threshold."

The report said the SEC could not play any firm role in this case.

"The SEC in a circular on March 1, last year set the uniform face value of shares at Tk 100 but refixed it at Tk 10
on March 10 the same year. The SEC suspended the effectiveness of its March 10 circular on February 2 this year,"
it said.

"The SEC's quick changes in decisions showed the regulator's weakness, which the manipulators used to their
advantage," the report said.

On right share, the report said issuance of such shares is legal either to fulfil regulatory requirements or raise
capital for business expansion.

On issuance of right shares, a company's earnings per share are diluted as the number of shares gets increased.
Although share prices are supposed to come down after that, the opposite happens on Bangladesh's capital market.

"Here the prices go up after issuance of right shares," the report said.

The Daily Star: Sunday, April 17, 2011


An influential section of businessmen and politicians, who allegedly siphoned off large sums of money from the
share market, is now trying to discredit the government's probe committee report on the securities market scam to
avert punishment.

The section is also lobbying hard to ensure that the government agencies do not go head with further investigations
beyond the primary findings. Finance ministry sources said the section has even threatened different policymakers
with putting the stock market through another turmoil if the government proceeds with any investigation.
A four-member probe committee led by Krishi Bank Chairman Khondker Ibrahim Khaled had prepared the report.

The group has targeted Khondker Ibrahim Khaled. It wants to make him controversial.

This was evident in a news item of a news agency Friday where Ibrahim Khaled was quoted as saying on a
television channel that he wanted share-market scamsters tried under martial law.

Khaled had given an interview to Bangla Vision television channel which was broadcast Thursday night. He was
discussing legal difficulties in trying the scamsters.

“But I had not said anything like that. I was saying under a democratic system if we take someone to the court, we
need to take very hard evidence and proof of allegations. Otherwise, we cannot get justice properly. But, this does
not happen under the martial law, where you don't need much evidence or proof,” he said clarifying his position on
the matter.

“Since we are operating under a democratic government, we have submitted our report with substantial evidence
and proof. Now in order to prosecute the accused people, the government should gather more hard evidence so that
the guilty cannot get away,” he said.

The veteran banker added that the probe committee report had enough ammunition to prove manipulation by
certain share-market players in the court of law. But there were some cases of manipulation that needed to be
investigated deeper before going to court.

Talking to The Daily Star Saturday, Khaled noted that a quarter was hatching a conspiracy over the report. Some
people do not want the report's recommendations to be carried out. “If these recommendations are implemented, it
would be very difficult to manipulate the share market in the future,” he said.

Those who want to manipulate the market have a lot of money and power. They are using money to divert the
focus on the recommendations and make the probe committee report controversial. “They are also trying to make
the government take a coercive stance against the probe committee,” Ibrahim Khaled pointed out.

Khaled's committee had only two months to dig into the scam in which small investors lost around Tk 20,000 crore
in the primary share market. The committee pinpointed around 60 players responsible for manipulating the market
for their own gain. Interestingly, these 60 players represent businessmen and politicians from Awami League and
BNP as well as civil and military officials and those in the regulatory authority.

Some of these players are also involved in the media.

The report submitted on April 7 had recommended immediate removal of the chairman of the Securities Exchange
Commission. The government has not removed him. The government had earlier said it would release the probe
report sometime this week but on April 13, Finance Minister AMA Muhith told journalists that it would not be
possible to do so as the government would need more time to scrutinise the content.

Meanwhile, Gono Forum President Dr Kamal Hossain yesterday demanded the government take immediate action
against share-market plunderers.

“Those who plundered Tk 20,000 crore from the share market and siphoned the money out of the country are the
evil spirits of West Pakistani exploiters,” he said at his party standing committee meeting.