ISLAMABAD: The Islamabad High Court (IHC) has delivered a landmark verdict, upholding the Securities and Exchange Commission of Pakistan’s (SECP) orders against the legal heirs of Siddiq Moti.
The Court dismissed the appeal filed against the decisions of SECP’s Securities Market Division and its Appellate Bench. The judgment, issued on November 19, 2024, reaffirms SECP’s regulatory authority and underscores the importance of safeguarding investor securities.
The case originated from a complaint alleging unauthorized transferred shares by brokerage house of Siddiq Moti from sub-accounts maintained by the complainant with Central Depository Company. The SECP, following an investigation, determined that these transactions were carried out in violation of the Central Depositories Act, 1997 and the findings were subsequently upheld by the SECP’s Appellate Bench in 2015.
The Islamabad High Court found no legal or procedural flaws in SECP’s handling of the case. It observed that broad authorisation clauses in account-opening forms do not grant brokers the authority to transfer securities from clients’ sub-accounts without explicit and specific approval. The court emphasised that factual determinations made by SECP and its Appellate Bench, as specialised regulatory bodies, cannot be overturned in a second appeal unless substantial legal errors are clearly established.
The SECP rigorously defended the case and after comprehensive hearings, the High Court dismissed the appeal and imposed costs of Rs 100,000, payable equally to SECP and the complainant. It is pertinent to mention that the SECP has been actively pursuing cases of misuse of client assets in courts to ensure investor protection and maintain market integrity.
To prevent misuse of client funds in the brokerage industry, the SECP has implemented several measures including imposing stricter regulations on brokers holding custody of clients’ assets, mandating fortnightly submission of client asset segregation statement by brokerage houses to Pakistan Stock Exchange and automating the transfer of securities directly from the seller’s account to the buyer’s account to eliminate the need for manual intervention through a broker’s main account.
This judgment reinforces SECP’s commitment to safeguarding investor interests and ensuring market integrity by upholding transparency and accountability in Pakistan’s capital markets.
Copyright Business Recorder, 2024
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