Inquiries under way: Cloud of regulatory action hovers over market
Reports surface of notices issued to leading brokers, fund managers.
The Karachi Stock Exchange (KSE) is the frontline regulator of the share market while the Securities and Exchange Commission of Pakistan (SECP) serves as its apex regulator. PHOTO: AFP
KARACHI:
Rumours about regulatory action against major stock market players kept trading on the Karachi bourse subdued on Monday, analysts said.
“Unconfirmed news that regulators have issued notices to leading brokers and fund managers also forced investors to remain on the side-line,” wrote Topline Securities Vice President Samar Iqbal in her stock market commentary at the end of the trading session.
The value of shares traded reached the lowest point in five weeks with Rs5.5 billion, which is down one-third from the traded value recorded on the last day of the preceding week. Similarly, the decrease in the market’s turnover from the preceding trading session was 25.8%.
According to sources, inquiries against as many as 23 different brokers are currently under way. These inquiries pertain mainly to the lack of the segregation of funds by brokers.
“These inquiries are actually notices that the frontline regulator has issued to a large number of brokers of late. Disciplinary action will depend on the outcome of these inquiries,” one source told The Express Tribune while requesting anonymity.
The Karachi Stock Exchange (KSE) is the frontline regulator of the share market while the Securities and Exchange Commission of Pakistan (SECP) serves as its apex regulator. Sources say the KSE initiated most of these inquiries in the last three weeks only.
Issued by KSE Chief Compliance Officer Abbas Mirza, most of these inquiries seek to determine whether the assets belonging to the clients of stock brokers are kept separated from those of the brokers.
Under the KSE regulations, each of the 200 brokers is expected to maintain a separate bank account that includes all the fund deposits of their clients along with the breakdown of clients’ balances. The KSE mandates that brokers must not use clients’ funds and securities for any unauthorised purpose – a rule that has been violated frequently in the past.
“Expect more inquiries to come to the fore in the next few days,” said the source while pointing out that the increased vigilance in recent weeks is an outcome of better coordination between the KSE and the SECP.
On its part, the SECP has concluded as many as 34 enforcement actions against brokers during January and February alone. Eleven of those orders were in the cases of insider trading. Other SECP orders against brokers during the two-month period were related to non-disclosure of material information to investors (2), non-compliance of know-your-customer requirements (2), violation of book building regulations (1), violation of trading in closed period (1), and prohibitory orders ( 17).
In one of its latest orders against a brokerage house, the SECP also imposed a penalty of Rs500,000 on Invest Capital Markets for violating capital adequacy requirements.
“As a part of its routine surveillance activities, the SECP seeks information from various market stakeholders, which might be directly/indirectly related to any possible non-compliance. It is never confirmed till the availability of all the required documents whether the information sought will result into any regulatory action,” an SECP spokesman said in response to a question about increased regulatory actions in recent weeks.
Published in The Express Tribune, March 10th, 2015.
Rumours about regulatory action against major stock market players kept trading on the Karachi bourse subdued on Monday, analysts said.
“Unconfirmed news that regulators have issued notices to leading brokers and fund managers also forced investors to remain on the side-line,” wrote Topline Securities Vice President Samar Iqbal in her stock market commentary at the end of the trading session.
The value of shares traded reached the lowest point in five weeks with Rs5.5 billion, which is down one-third from the traded value recorded on the last day of the preceding week. Similarly, the decrease in the market’s turnover from the preceding trading session was 25.8%.
According to sources, inquiries against as many as 23 different brokers are currently under way. These inquiries pertain mainly to the lack of the segregation of funds by brokers.
“These inquiries are actually notices that the frontline regulator has issued to a large number of brokers of late. Disciplinary action will depend on the outcome of these inquiries,” one source told The Express Tribune while requesting anonymity.
The Karachi Stock Exchange (KSE) is the frontline regulator of the share market while the Securities and Exchange Commission of Pakistan (SECP) serves as its apex regulator. Sources say the KSE initiated most of these inquiries in the last three weeks only.
Issued by KSE Chief Compliance Officer Abbas Mirza, most of these inquiries seek to determine whether the assets belonging to the clients of stock brokers are kept separated from those of the brokers.
Under the KSE regulations, each of the 200 brokers is expected to maintain a separate bank account that includes all the fund deposits of their clients along with the breakdown of clients’ balances. The KSE mandates that brokers must not use clients’ funds and securities for any unauthorised purpose – a rule that has been violated frequently in the past.
“Expect more inquiries to come to the fore in the next few days,” said the source while pointing out that the increased vigilance in recent weeks is an outcome of better coordination between the KSE and the SECP.
On its part, the SECP has concluded as many as 34 enforcement actions against brokers during January and February alone. Eleven of those orders were in the cases of insider trading. Other SECP orders against brokers during the two-month period were related to non-disclosure of material information to investors (2), non-compliance of know-your-customer requirements (2), violation of book building regulations (1), violation of trading in closed period (1), and prohibitory orders ( 17).
In one of its latest orders against a brokerage house, the SECP also imposed a penalty of Rs500,000 on Invest Capital Markets for violating capital adequacy requirements.
“As a part of its routine surveillance activities, the SECP seeks information from various market stakeholders, which might be directly/indirectly related to any possible non-compliance. It is never confirmed till the availability of all the required documents whether the information sought will result into any regulatory action,” an SECP spokesman said in response to a question about increased regulatory actions in recent weeks.
Published in The Express Tribune, March 10th, 2015.