A housewife earned huge profits at stock exchange based on inside information provided by her husband working as Karachi Automated Trading System (KATS) operator for a securities market company where he provided non-public information relating to trading orders of the clients to his wife.
According to an order issued by the Securities and Exchange Commission of Pakistan (SECP) here on Thursday, wife violated the provisions of the Ordinance. Therefore, in exercise of powers under Section 15E of the Securities and Exchange Ordinance, the SECP has imposed a penalty of Rs 755,307 on her for trading based on the material information passed on by her husband pertaining to the orders of clients, in violation of the provision of Section15A of the Ordinance.
Sources said that the SECP has rejected the argument that she is a housewife and not aware of the legal provisions with regard to the insider trading. A husband working as KATS operator of a securities market company was caught while providing non-public information relating to trading orders of the clients to his wife for trading in stock exchange based on inside information.
In this regard, it has been established that the said woman has violated the relevant provisions of the Ordinance and traded based on the inside information pertaining to the orders of the clients. She has indulged in insider trading based on the information available with her and hence failed to comply with the provisions of the Section 15A of Ordinance, which attract the penal provisions of Section 15E of the Ordinance.
The SECP has also discussed the front running and its consequences and why it is illegal. Front running means buying or selling of securities ahead of a client's order so as to benefit from the subsequent price movement. This denotes persons dealing in the market, knowing that a transaction will take place in the near future and that price of share is likely to move in his favour. Front running is not only unethical but at the same time it is illegal. It is imperative that a broker and its employees acting on behalf of an investor must execute the investor's order in a way that is most advantageous to the investor rather than themselves. By front running, the Broker or its officer acts in an unethical manner, putting his own interest above that of his client, thereby causing a fraud. In fact the KATS operator in the instant case was stealing a part of money from the client which otherwise they won't have to pay.
The SECP has examined the record available with the Commission and deliberation made during the hearing proceedings. It is evident that KATS operator being an insider disclosed the material non-public information relating to trading orders of the clients, to his wife, who traded in the scrips, which resulted in significant amount of profit to her. Wife is involved in the front running of the clients of securities company and earned an accumulated profit of Rs 755,307 through these transactions. Such information classifies as 'inside information' within the scope and meaning of Section 15B (l)(c) of the Ordinance, the SECP added.