The SECP Chairman, Zafar Hijazi, has expressed the SECP's firm resolve that strict action would be taken against brokerage houses found involved in malpractices and misuse of client assets. He also said that the SECP is actively coordinating with law enforcement agencies, including NAB to apprehend the culprits involved in misappropriation of investor assets in a timely and efficient manner.
He was addressing the consultative group, comprising of senior market participants, including Arif Habib, Aqueel Karim Dhedhi, Amin Issa Tai, Yasin Lakhani, Najam Ali, Zahid Latif, Omar Iqbal Pasha, Asim Zafar, Dr Yasir Mehmood, Shahid Ghaffar, MD NIT and Farid Khan from MUFAP. He was accompanied by Commissioner, SMD.
The SECP also shared its findings from the probe of brokerage houses and it was noted with concern that some brokerage houses are engaged in the illegal activities of raising deposits from the public/investors against promise of fixed rate of return under the umbrella of stock market investments.
It was agreed that that the said activities of brokers are illegal and tantamount to defrauding the public. It was also emphasised that the investors and the public should be cautious of these illegal activities and should not engage themselves or be a party to any such illegal investment activities.
The investors/general public should not give deposit to any broker by whatever named called, as the same is illegal and any claim in respect of such illegal deposit would not be considered/entertained by the stock exchange as the same is beyond the scope of legitimate capital market activities.
Zafar Hijazi also emphasised to the consultative group that a broker association, which has a countrywide representation of brokerage industry should be formed, which should assume the role of a self-regulatory organization and play an active role in checking and enforcing the entry standards and implementing a robust code of conduct for brokers.
It was agreed that a broker association will be formed, which will graduate into a SRO and play its due role. It was decided that single-member companies should not be allowed to obtain brokerage licenses due to their dependency on one person and weak board structure.
It was also agreed upon that strict checks and balances should be imposed on the process for opening branch offices and only licensed activities should be allowed in such branches, including mandatory rating of such brokers from credit rating agencies. Earlier, the SECP Chairman and Commissioner, SMD, also had a meeting with Muneer Kamal, Chairman, Pakistan Stock Exchange (PSX). During the meeting both regulators discussed the overall situation in the Pakistan capital market.
Among other issues, the matter of illegal deposit taking activities by some brokerage houses also came under discussion and it was reiterated that strict action should be taken to restrict such activities and any claims arising from such illegal activities shall not be recognized by the stock exchange.
The consultative group fully endorsed the decisions taken by the SECP in consultation with PSX to prohibit single-member companies from obtaining brokerage license, imposing control measures on opening of branches by brokers, restricting custody services to well capitalized and specialised institutions and strengthening the joint inspection regime. It was also noted that the special committee constituted by the SECP to review modalities of financing by or through brokers would submit its recommendations within a week.-PR
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