The Securities and Exchange Commission of Pakistan (SECP) has launched a major enforcement drive, particularly in the capital market, surpassing actions against insider trading and market manipulation, as compared to serious violations made during past years. During a workshop organised by the SECP for journalists here on Thursday, the Chairman of the Securities and Exchange Commission of Pakistan, (SECP) Zafar Hijazi has said that we are taking action against violators irrespective of their strong social or financial standing. Among the most prominent case is a fine on the CEO of a company for buying shares during the closed period.
More stern actions are expected against insider trading and other manipulations, he added.
The SECP Chairman said that a clear message has been conveyed to the stock market that the SECP being a regulator is effectively monitoring the activities of the brokers. The buyers and sellers in the market have realised that the SECP has started its regulatory work while taking initiatives, actions and decisions to discipline the market participants. Hue and cry in the market has been witnessed following surveillance and monitoring by the commission. Until people are confident that transparency prevails in the capital market, genuine investment cannot be witnessed. He questioned that why manipulators and day traders have vanished from the market after SECP''s effective monitoring.
"We want to give loud and clear message to all that being regulator the SECP is vigilant in taking stern actions against violators. We are developing systems to differentiate working within different departments of the SECP to enforce regulations effectively," the SECP Chairman said.
Apart from strengthening its powers as the regulator, the SECP plans to tighten the legal framework not only around the brokers but also the analysts, who too at times play role in market manipulation.
The commission has finalised the ''Research Analyst Regulations'' that is expected to be floated for public by the end of March, 2015.
The new set of regulations will have a strong fit and proper criteria and set of checks on the analysts too, including limiting their freedom of public speech such as giving statements to media, and restricting trading activities of financial analysts.
The chairman also said that there were six laws in the pipeline including new Companies law, securities act and futures trading bill and these law were expected to be in place by June 2016 after approval of the Parliament.
Citing an example, he said that he wanted to make it clear that no thief would do anything boldly by putting in place an effective regulatory mechanism. The SECP, he said, was devising a code of conduct for its employees where ban would be imposed on their socialising.
He said that a clear message was given to the stock market that the SECP being a regulator was effectively monitoring the activities of the brokers. The buyers and sellers have realised that the SECP has started its regulatory work while taking initiatives, actions and decisions to discipline the market participants.
"Our only tool for suspicion is transaction, therefore we are planning to strengthen our IT systems for a better monitoring and surveillance," SECP Chairman said. The IT system of SECP currently have 21 kinds of alerts such as extraordinary movements of prices, volumes, etc, and the Commission plans to upgrade the system to detect 60 categories of abnormal movements during and after trading in the stock markets.
Hijazi further stated that the SECP is finalising six major legislations including new Companies law and SECP Act; Futures Trading Bill which would be moved to the Parliament in coming days.
About the seriousness in introducing new laws, SECP Chairman said that even an expert team is presently working on the new Futures Trading Bill to be moved to the Parliament in near future.
Showing full confidence in his team of Securities Market Division and Market Surveillance Department, he specifically pinpointed that he is proud to have officials like Imran Inayat Butt, Director, Market Supervision and Registration Department and Abid Hussain, Director, Market Surveillance Department of Securities Market Division. These officials and their teams are working day and night to bring transparency in the stock market affairs, Hijazi said.
He was confident that the SECP would become a powerful machine to check manipulation in the stock market operations. For this purpose, transparency in the market operations is the key ingredient for success of the stock market operations.
The SECP is also strengthening laws to ensure that only qualified and registered persons would be allowed to issue reports on the stock market, he remarked.
When asked how the SECP would ensure that insider information would not be shared by SECP officials to the brokers, top SECP official said a very honest team is dealing with the securities market surveillance and they would be properly compensated to focus on their primary job of checking market manipulation.
The SECP Chairman said that the commission has no objection in genuine buying and selling activities at stock exchanges, but no market manipulation would be allowed by anyone.
The SECP officials informed that 34 enforcement actions have been taken by the SECP in 2015, 55 in 2014 and 33 enforcement actions in 2013. Out of 34 actions taken by the SECP in 2015, 11 cases are related to insider trading/front running; 2 cases pertains to violations of code of conduct of brokers and Agents Registration Rules, 2 cases of violation of section 22 of the Securities and Exchange Ordinance and 17 warning letters have been issued during the period.
To a question, Hijazi said the SECP has been engaged in drafting a new Code of Conduct for the SECP employees including Commissioners. Under the proposed Code of Conduct, the commission has imposed restriction on the Commissioners of the SECP on socialisation or inviting/attending marriage functions etc.
To a question, an SECP official said that in one case against Al Abbas Sugar Mills, the SECP imposed a penalty after establishing violation.