Warning issued over possible violation of securities laws
Warning letters for possible violations of securities laws were issued to 27 brokers of the Karachi Stock Exchange.
KARACHI:
Warning letters for possible violations of securities laws were issued to 27 brokers of the Karachi Stock Exchange and seven brokers of the Lahore Stock Exchange.
The letters were issued by the Securities and Exchange Commission of Pakistan (SECP) for possible blank sales, wash sales, circular trading, cross trade and broker misconduct, according to the head, internal and external communication SECP, Shakil Ahmad Chaudhary.
Strict action has been taken by the SECP as provided under the law based on the severity of the offence. In the seven months of 2010, legal proceedings were initiated for these violations of securities laws, orders were issued after conducting hearings with penalties being imposed on the stock exchanges’ brokers and market stakeholders.
Moreover, in those cases where the offence has been committed due to trading error or operational mistake, strict warnings have been issued to the brokers.
“Blank sale and short selling are two ways of profiting from a falling stock market. Essentially, the seller first sells the securities and then buys them back at a lower price, netting the difference,” wrote an official of the Securities and Exchange Commission of Pakistan.
The distinction among a sale, a short sale and a blank sale is made by the “regulations governing short selling in the ready market” which were implemented in 2002.
A sale is not subject to any special restrictions if it is backed by ownership of shares or a buy transaction before a sell transaction. It becomes a short sale if the investor did not own the shares or had not first executed a buy transaction but had arranged for borrowing the shares before you sold them.
It becomes a blank sale if you had not even borrowed the shares sold, for example, if the investor or broker just sold in thin air.
The Securities Market Division of the SECP actively monitors trading activities of the stock market to check compliance with the prevailing regulatory framework and to investigate potential violations of securities laws. It also strives to maintain fair, transparent and efficient markets.
Published in The Express Tribune, August 6th, 2010.
Warning letters for possible violations of securities laws were issued to 27 brokers of the Karachi Stock Exchange and seven brokers of the Lahore Stock Exchange.
The letters were issued by the Securities and Exchange Commission of Pakistan (SECP) for possible blank sales, wash sales, circular trading, cross trade and broker misconduct, according to the head, internal and external communication SECP, Shakil Ahmad Chaudhary.
Strict action has been taken by the SECP as provided under the law based on the severity of the offence. In the seven months of 2010, legal proceedings were initiated for these violations of securities laws, orders were issued after conducting hearings with penalties being imposed on the stock exchanges’ brokers and market stakeholders.
Moreover, in those cases where the offence has been committed due to trading error or operational mistake, strict warnings have been issued to the brokers.
“Blank sale and short selling are two ways of profiting from a falling stock market. Essentially, the seller first sells the securities and then buys them back at a lower price, netting the difference,” wrote an official of the Securities and Exchange Commission of Pakistan.
The distinction among a sale, a short sale and a blank sale is made by the “regulations governing short selling in the ready market” which were implemented in 2002.
A sale is not subject to any special restrictions if it is backed by ownership of shares or a buy transaction before a sell transaction. It becomes a short sale if the investor did not own the shares or had not first executed a buy transaction but had arranged for borrowing the shares before you sold them.
It becomes a blank sale if you had not even borrowed the shares sold, for example, if the investor or broker just sold in thin air.
The Securities Market Division of the SECP actively monitors trading activities of the stock market to check compliance with the prevailing regulatory framework and to investigate potential violations of securities laws. It also strives to maintain fair, transparent and efficient markets.
Published in The Express Tribune, August 6th, 2010.