Misuse of holdings: SECP takes Eastern Capital to court
brokerage house facing charges of having transferred shares owned by investors to other accounts without knowledge.
The Securities and Exchange Commission of Pakistan (SECP) has filed a court case against Eastern Capital Limited, a former member of the Karachi Stock Exchange (KSE), the director of the brokerage company as well as other accused.
In a press release issued by the SECP on Wednesday, the regulator alleged that the accused were “involved in non-transfer of shares/funds and unauthorised pledges of client’s shares and other prohibited activities under Section 24(2) of the Central Depositories Act of 1997 as well as offences under relevant provisions of the Pakistan Penal Code (PPC)”.
The brokerage house is facing charges of having transferred shares owned by investors to other accounts without their knowledge or approval. The regulator has also found that Eastern Capital pledged these holdings to financial institutions to obtain financing, which was also done without the approval of shareholders. The shares of investors were consequently “mostly used to liquidate liabilities of the brokerage house resulting in total loss to the investors” said the official release. SECP has received numerous complaints against Eastern Capital and four other KSE brokers mainly pertaining to the alleged non-transfer of shares and non-payment of funds. An SECP spokesperson explained that the regulator had directed these brokers to resolve outstanding claims quickly and to immediately transfer funds and shares of claimants. The brokerage houses failed to do so and the SECP suspended their registration.
Inquiries have also been initiated against the other brokers.
SECP has filed a criminal complaint in sessions court Karachi-South against Eastern Capital Limited and others. “This is the third criminal complaint against the brokerage houses involved in illegal pledging of shares. The earlier two criminal complaints were filed against Capital One Equities Limited and Cliktrade Limited” cited SECP. Arrest warrants have also been issued against all the accused in this case.
Published in The Express Tribune, January 13th, 2011.
In a press release issued by the SECP on Wednesday, the regulator alleged that the accused were “involved in non-transfer of shares/funds and unauthorised pledges of client’s shares and other prohibited activities under Section 24(2) of the Central Depositories Act of 1997 as well as offences under relevant provisions of the Pakistan Penal Code (PPC)”.
The brokerage house is facing charges of having transferred shares owned by investors to other accounts without their knowledge or approval. The regulator has also found that Eastern Capital pledged these holdings to financial institutions to obtain financing, which was also done without the approval of shareholders. The shares of investors were consequently “mostly used to liquidate liabilities of the brokerage house resulting in total loss to the investors” said the official release. SECP has received numerous complaints against Eastern Capital and four other KSE brokers mainly pertaining to the alleged non-transfer of shares and non-payment of funds. An SECP spokesperson explained that the regulator had directed these brokers to resolve outstanding claims quickly and to immediately transfer funds and shares of claimants. The brokerage houses failed to do so and the SECP suspended their registration.
Inquiries have also been initiated against the other brokers.
SECP has filed a criminal complaint in sessions court Karachi-South against Eastern Capital Limited and others. “This is the third criminal complaint against the brokerage houses involved in illegal pledging of shares. The earlier two criminal complaints were filed against Capital One Equities Limited and Cliktrade Limited” cited SECP. Arrest warrants have also been issued against all the accused in this case.
Published in The Express Tribune, January 13th, 2011.