The Securities and Exchange Commission of Pakistan (SECP) has observed that segregation of clients' assets is of paramount importance for the protection of investors' interest at the stock exchanges as brokers being custodian of clients assets are expected to comply with the applicable regulatory framework in letter and spirit.
According to an SECP order issued here on Monday against a broker of Karachi Stock Exchange (KSE), after a detailed and thorough perusal of the facts, evidence/information available on record, contentions and averments made by the representatives of the brokers during the course of the hearing, it is evident that the broker failed to properly maintain segregation of clients' assets; failed to prepare Know Your Customer (KYC) and Customer Due Diligence (CDD) policy in a timely manner and was involved in the imposition of late payment charges.
The SECP of the considered view that segregation of clients' assets failed to prepare KYC and CDD policy in a timely manner, and was involved in the imposition of late payment charges. The SECP said that segregation of clients' assets is of paramount importance for the protection of investors' interest. The Respondent being the custodian of clients' assets is expected to comply with the applicable regulatory framework in letter and spirit.
The violation of the Rules and Regulations is a serious matter. Therefore, in exercises of the powers under Section 22 of the Ordinance, the SECP imposed on the broker a penalty of Rs 25,000. The Respondent is further directed to comply with the Rules 1971 and the guidelines issued in letter and spirit. The broker should ensure segregation of clients' assets and maintain separate bank accounts and use that one account solely for the purpose of clients' funds.
Brief facts of the case are that the Commission in exercise of its powers under Subsection (1) of Section 6 of the Ordinance read with Rule 3 and Rule 4 of the Stock Exchange Members (Inspection of Books and Record) Rules, 2001 "Inspection Rules") ordered an inspection of the books and records required to be maintained by the said broker.
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