The KSE-100 has reached 50,000 milestone level, the PSX has been sold to the Chinese and headlines have been made but one issue still remains unresolved; investor trust. Whenever the market performs well or the index hits a good level, many raise their hands to claim credit but at any sign of failure, the investors are left high and dry.
Out of a population of 200 million, there are only about 250,000 investors in the market. Has the regulator or the exchange given serious thought on as to why this number is so low in one of the best performing markets of the world? The general public simply doesnt have trust in those involved in various operational aspects of the market because they have been burnt far too many times now.
Recently a broker, MR Securities from Lahore defaulted and ran away with investor money. The amount being quoted around is about Rs7 billion. Firstly, how does someone default in a such a strong bull market where there have not been any big drawdowns. The word on the street is that MR Securities owner was running a Ponzi scheme from the start.
These kind of activities are nothing new for our stock market. Many brokers over the years have defaulted and ran away with hard earned money of nave investors. Fake ledgers are maintained by brokers and sent out to clients. Even dividends are also received directly by the broker and paid to the client if and when inquired.
If the investor goes and complains to exchange, he is buried in legal paper work. Onus of producing correct documents is also placed on the investor, which is very difficult since he has been receiving fake documents all along. If the issue proceeds towards a tribunal, then other brokers come and defend the accused broker.
Market veterans are of the view that black sheep exist everywhere and there is no way to determine if a broker wants to intentionally cheat his clients. But these activities are happening right under the nose of PSX and SECP. The building right across to that PSX administration has offices of brokers who are involved in these fraudulent activities.
It is high time that PSX and SECP go beyond rhetoric and clean up this mess.