KARACHI: Following the directive of the Securities and Exchange Commission of Pakistan (SECP), the Karachi Stock Exchange (KSE) suspended all trading facilities of KASB Securities on Tuesday.
The SECP said it issued the directive “to maintain the confidence of investors in the securities market, to ensure adequate protection for such investors and to uphold smooth and uninterrupted operations.”
The decision follows the imposition of a six-month moratorium on KASB Bank by the government for failing to meet capital adequacy requirements. The bank is the parent company of the brokerage house and owns a 77.1% stake in it. KASB Bank also acted as the settling bank for KASB Securities.
The SECP also directed the Central Depository Company to facilitate pending settlements of KASB Securities in respect of trades executed until November 17.
“CDC is further directed to restrict all movement of securities from the participant umbrella of KASB Securities and only allow portfolio transfers from the sub-accounts under the control of KASB Securities till further orders,” the notice said.
Speaking to The Express Tribune, a capital market player said the decision was expected in the wake of a crackdown on the brokerage house’s parent company. “KASB Securities knew about the oncoming suspension of its trading facilities. In fact, KSE officials let the brokerage function on Monday because last week’s positions had to be squared,” he said while requesting anonymity.
Noting that the brokerage house was expecting to receive money from clearing on a net basis, the source added that KSE officials had informally requested KASB Securities not to take large positions on Monday.
Most analysts believe investors’ money with KASB Securities is safe because a default is a distant possibility in this case. Sooner or later, deposits of the parent bank exceeding Rs300,000 will be freed up and the brokerage house will get access to its funds.
Despite many phone calls and email requests, no one from KASB Securities was available for official comment. However, many investors who called up its office to enquire about the status of their shares were told that the suspension order was to be lifted ‘within hours’.
Claiming that a meeting was under way between SECP officials and the KASB Securities management, customer service representatives at the brokerage house reassured anxious clients the matter would be sorted out before the end of working hours on Tuesday.
The share of KASB Securities took a hit within the first couple of trading hours on Tuesday. A lower lock kicked in as soon as its share price declined by Rs1 to Rs6.20 after a turnover of 289,500 shares.
In an email sent to its clients on Tuesday afternoon, KASB Securities offered help in transferring their shares from KASB Securities CDC subaccount to another broker’s sub-account/investor account.
“Rest assured, your shares and cash are safe,” read the statement attached with the email that also contained CDC’s official letter for the transfer of shares from one broker’s subaccount to another’s.
Published in The Express Tribune, November 19th, 2014.
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COMMENTS (6)
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SBP has mentioned the number of depositor who would not be affected at all i.e, 92.3% of banks depositors. They should have also mentioned the amount of deposits made by such bank. Probably 7.7% of the depositors made 92.3% of the total deposits of the bank. This explains the total picture as to who contributes 92.3% required for financing investment. Let us not go to cheap slogan, but make a true analysis of the situation required to foster strong economic growth on merits, and not politics which is commonly talked in the general election. It may be said without hesitation that KASB moratorium will also affect other banks deposits and withdrawal matters; people would withdraw their deposits from banks and investment institution and keep them under their pillow. The present situation has arised on account of grant of unlawful loans and generous right roofs. Recovery will therefore depend if genuine and bonafide loans and investment have been made.
The activities of a parant company do not affect performance of its subsidiary. There is no reason for this suspension.
This step of SECP is nothing but victimization for I don't know what reasons. There was no warning issued for the public in advanced. Even in the letter issued does not give the reason for which KASB security is suspended. This issue is handled pathetically by SECP, probably on Government and/or State Bank's pressure.
Disappointed with the actions of SECP. Was this required? It could have been handled in a better way. What message have we sent to Foreign investor. The confidence of the local investor is also shaken.
KASB Security may possibly start Security Guards @ listed KSE companys. Good profit. Deploy all staff. Good Luck Change munu Gitka to Naswar
Its sad to see Pakistan's equivalent of "Lehman Brothers" falling down from the grace....The harsh treatment for KASB Bank may be appropriate in terms of governance, but authorities should try to save KASB Securities. Being an important capital market player (15% market share in overall trading and 20% share in international trading at KSE), KASB Securities definitely deserves better handling from authorities. This will not only send negative signals but will also affect key Pakistan companies who are trying to attract international investors' interest through an investors conference currently going in Dubai (the conference is being arranged by KASB Securities' international partners.