KARACHI : The Securities and Exchange Commission of Pakistan (SECP) has suspended the registration of five members of Karachi Stock Exchange (KSE) till the claims against them in the light of the investors' complaints are ascertained and settled in accordance with law.
Following the SECP decision, the Karachi Stock Exchange has also suspended the trading rights of the these five members with immediate effect and until further notice to protect the interests of the investors. The SECP took this decision in exercise of its powers under the Broker and Agents Registration Rules, 2001, and suspended the registration of these five brokerage houses on charges of non-compliance with the various provisions of the Broker and Agents Registration Rules, 2001 pertaining to investor rights.
The registration of these brokerage houses will remain suspended, in public interest and for the protection of investors and to preserve capital market integrity, till claims against them in light of the investors' complaints could be ascertained and settled.
The names of the KSE members whose trading rights and registration have been suspended are: Eastern Capital Limited; Prudential Securities Limited; ClikTrade Limited; MKA Securities (Private) Limited; and Capital One Equities Limited. The SECP in a statement issued on Monday also announced that an impartial enquiry into the business affairs of these brokerage houses will be conducted to ascertain the quantum and genuineness of investors' complaints, in accordance with law.
The SECP has introduced a number of capital market reforms over the past years aimed at providing increased investor protection and minimisation of manipulative elements in the market. However, during the recent past, SECP, as well as the Karachi Stock Exchange (KSE), received substantial number of investor complaints/claims, majority of which pertained to non-transfer of shares to the investors' CDC Accounts and non-payment of funds, which can be attributed to the unauthorised pledge/transfer of securities by some of the stockbrokers.
Taking cognisance of the matter, the SECP advised these brokers to expedite resolution of pending investor complaints/claims and issued instructions for immediate transfer of clients' shares to their respective CDC account. Furthermore, the SECP advised KSE, in its capacity as frontline regulator, to submit a concrete proposal for efficient and equitable resolution of unresolved investors' complaints/claims.
In the meanwhile, SECP, in pubic interest and for protection of investors, imposed restrictions on opening of new CDC sub-accounts and registration of new UINs by these brokerage houses. This restriction was, however, immediately removed for those brokerage houses which were able to resolve all pending investor claims/complaints registered against them.
Further, in order to inculcate good governance in business conduct of brokers and for safeguarding the interests of investors, the SECP, in co-ordination with relevant stakeholders, introduced standardised sub-account opening form at CDC and imposed prohibition on all general purpose/blanket authorities for handling book entry securities of clients by the broker to curb any misuse, and safeguard the interest of investors as well as of the participants.
Taking into consideration that no concrete steps were taken by these brokers, despite ample time granted, the SECP issued notices to the abovementioned five brokerage houses, and provided them with another opportunity of representation before the Commission on June 25, 2009.
However, when these brokerage houses failed to put forth any concrete time-bound action plans and take tangible measures for the resolution of outstanding investors' claims, the SECP, using its regulatory powers, issued orders for suspension of registration of the above-mentioned brokers. The SECP has reiterated its commitment to continue providing regulatory framework and taking enforcement actions for the protection of investors, curbing market abuse and preserving capital market integrity.
Copyright Business Recorder, 2009
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