KARACHI: The Securities and Exchange Commission of Pakistan (SECP) said on Tuesday it “deplores” articles and comments published in the media that give a misleading impression that brokerage houses are surrendering their trading right entitlement (TRE) certificates due to a stringent regulatory framework put in place by the SECP.
“As a matter of fact, 12 TRE certificate holders out of 380 surrendered their TREs for being mostly inactive or dormant. Some of them wanted to exit the brokerage business post-demutualisation, as they had been issued shares in Pakistan Stock Exchange (PSX) against their memberships,” it said in a press release.
Lengthy tussle between stock brokers, SECP finally over
Memberships on the stock exchanges were in limited supply prior to demutualisation. Apart from trading rights, memberships also carried ownership claims on assets of the exchange. Subsequent to demutualisation of the stock exchange, ownership has been separated through the issuance of shares.
Now a person can obtain trading rights either by purchasing the same from a brokerage house or from the stock exchange directly. The stock exchange under the Demutualisation Act is allowed to issue 15 TRE certificates every year with effect from May 2016.
“Under its statute, the SECP is entrusted with the prime responsibility of ensuring the protection of investors in terms of misuse of client assets by brokers and systemic risk in the market. It is with this vision that many reforms were instituted in the wake of the 2008 global crisis,” it said.
“The crisis resulted in 39 brokers defaulting on client assets with thousands of claims amounting to more than Rs3.7 billion,” it added.
Corruption cases: SECP official takes government to court
Cases against these brokerage houses are pending with the National Accountability Bureau (NAB) and courts of law.
After the promulgation of Securities Act 2015, the SECP introduced various new regulations and many new requirements following a detailed consultation process, including reporting on client-assets segregation in view of instances of misuse of investor assets by brokers in the past.
In the case of the Securities Brokers (Licensing and Operations) Regulations, an extended consultative process took place for over five months despite the legal requirement of only 15 days, the SECP statement said.
‘Over-regulation driving smaller players away’
“A recent initiative by the SECP has been the setting up of a dedicated Market Risk Analysis Unit at its head office to continuously monitor the risk in the market and carry out independent analysis of the market situation,” said the press release.
“The regulator will ensure strict enforcement and compliance with the regulatory framework and handle any market abuse and activities that may exploit investors or damage confidence in our market with an iron hand,” it added.
Published in The Express Tribune, July 20th, 2016.
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