SECP identifies 240 cases of non-compliance with regulatory framework for adjudication

The Securities and Exchange Commission of Pakistan (SECP) has identified 240 cases of non-compliance with regulatory framework for adjudication as a result of investigation/inspection of brokerage houses and non-compliance with Pakistan Stock Exchange (PSX) rulebook and Central Depository Company (CDC) regulatory framework.
According to the SECP annual report (2018), during the year 2017-18, the SECP continued to consolidate and augment its efforts to ensure compliance with the regulatory framework by the corporates, NBPCs, insurance sector and capital market participants. The extended efforts covered a range of activities such as onsite inspections, offsite review, enquiries, investigations and specialized inspections, the ultimate objective being that all regulated entities comply with and implement the SECP's regulatory framework in its true spirit.
In order to ensure the orderly execution of the market operations, significant measures have been taken by the SECP. In various instances of non-compliance with the regulatory provisions, the Securities Market Division of the SECP initiated six enquiries and investigations, conducted five inspections/specific purpose reviews and initiated and completed 30 thematic reviews with regard to customer due diligence and AML. The department also referred six cases for criminal prosecution i.e. one for insider trading, one for market manipulation and four others market abuses.
During the year 2017-18, 240 cases of non-compliance with regulatory framework, identified as a result of investigation/inspection of brokerage houses and non-compliance with PSX rulebook and CDC regulatory framework were referred for adjudication.
The SECP said that considering rising complexities into compliance risk, the Market Supervision and Compliance Department (MSCD) of the SECP continued to expand its scope of activities to new avenues such as theme based investigation, inspections of self-regulatory organizations (SRO), investigation on leakage of sensitive trading information etc.
During 2017-18, the department conducted thematic investigation over identification of original beneficial investors, which successfully resulted identification of cases, wherein, third persons were identified to have been conducting the trading.
It has also conducted thematic reviews over very important area, i.e. anti-money laundering (AML)/counter financing terrorism (CFT) of large number of brokerage houses, such exercise brought number of risky areas, which needed improvement, thereby leading to full compliance. The MSCD also conducted and concluded over leakage of sensitive trading information, which managed to identify the sensitive avenues that could become source of leakage.
The identified areas were forthwith rectified under the supervision of an SECP appointed team. As a matter of routine, the MSCD conducted inspection of various brokerage houses, a credit rating company and of SROs. The SECP examines financial health and assesses regulatory compliance level of non-bank financial companies (NBFCs), notified entities (NEs) and modarabas on the basis of published information and data received electronically through Specialized Companies Returns System (SCRS) on a monthly basis.
Offsite examination of all asset management companies, mutual funds, pension funds, investment advisory portfolios, and deposit / non-deposit taking lending institutions (i.e. leasing companies, investment banks, non-bank microfinance companies, and modarabas) is conducted on semi-annual basis.
The findings observed during offsite examinations of entities are taken up with respective entities primarily through compliance and warnings letters. Statistics of offsite examinations conducted during the last two years revealed that the SECP conducted 171 offsite reviews during 2018 as compared to 129 offsite reviews during 2017.