ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has prohibited two banks from engaging in false trading in shares in the securities market and avoid such a pattern of trading in the ready market in the future.
The SECP had issued prohibitory notices (dated April 9) to these two banks.
According to the letter issued by the Supervision Division of the SECP to one of the banks, this is with reference to correspondences exchanged between the Securities and Exchange Commission of Pakistan (“Commission”) and the bank regarding various trades carried out by the bank in ready market during the period from January, 2020 till January, 2021 in the shares of several companies.
In case of the second bank, various trades carried out by the bank in ready market during the period from January 2020 till December 2020 in the shares of several companies.
Upon detailed review of trading data, it was observed that large quantum of trades carried out by the banks during the aforesaid period in ready market were matched with the proprietary accounts of brokerage houses through which it was trading.
In the said transactions, bank first sold and then on the next day bought those shares back of approximately same quantity and at either the same rate/quantity or slightly higher rate, wherein, counterparty on buy and sell trades was the proprietary account of the same brokerage house.
The aforementioned pattern of trading as explained may lead to false trading which is not in the interest of investors trading in the securities market.
Therefore, representatives of the bank were called for a meeting to explain the rationale for carrying out such trades in ready market, wherein, they explained that such transactions were carried out only for the purpose of realisation of gain/loss in the securities held by the bank.
The SECP is of the view that the above pattern of trading adopted by the bank may be detrimental for a fair and transparent trading in ready market where trading volumes in listed companies are generated based upon genuine demand and supply mechanism.
The Commission is responsible for regulating the capital market in order to ensure that it is functioning in a fair, efficient, transparent and orderly manner. Therefore, it is imperative to take corrective measures for the smooth and efficient functioning of the capital market and protect the interest of the general public.
In view of the above, the Commission in exercise of its powers conferred under Section 143 of the Securities Act, 2015 read with Section 20 (4) (zb) of the SECP Act, 1997, hereby, prohibits the banks from engaging in the said pattern of trading in the ready market as explained or any other such arrangements which may affect the integrity of the stock market.
Copyright Business Recorder, 2021