Caught in the act: SECP sanctions Faysal Bank for manipulating stock prices

Published: April 19, 2012

The country’s sixth largest bank was buying stocks based on research reports, which is in contrast to the facts revealed after SECP’s investigation, according to a statement.

The Securities and Exchange Commission of Pakistan (SECP) has issued a prohibitory order against Faysal Bank after getting evidence that the bank was involved in manipulating prices of a few stocks.

The country’s sixth largest bank was buying stocks based on research reports, which is in contrast to the facts revealed after SECP’s investigation, according to a statement on Securities and Exchange Commission of Pakistan’s official website.

According to the SECP, this caused an increase in the price of these scrips and allowed the bank to portray a better financial picture.

According to the prohibitory order, Faysal Bank is reported to have brought thinly traded scripts before the end of accounting periods to inflate the stock prices of the scripts and exhibit high value of their investments in financial reports for the period; and then selling the scrips.

This is reported to have resulted in two distortions: firstly, the stock prices of the scripts were manipulated, which added significant
volatility to the stocks’ prices.

Secondly, the resulting increase in the prices of the stocks, because of Faysal Bank’s trading activity, considerably over inflated the amount to be reported on its financials and allowed Faysal Bank to portray better financial position, which in essence is not the true
picture of investments held by it; the order reveals.

The order also states that Faysal Bank, in response to the inquiry about the alleged activities, could not provide acceptable justification.

Published in The Express Tribune, April 19th, 2012.

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