ACE Securities debacle: Claim verification ‘almost complete’

Initial payments will be made after process is complete.

KARACHI:

External auditors have “almost completed” the claim verification process for the settlement of outstanding claims on ACE Securities, a Karachi-based brokerage whose management has fled the country after swindling its clients.

“Once the process is complete, initial payments from the Karachi Stock Exchange’s (KSE) own Investor Protection Fund (IPF) will be made, with any further amounts disbursed after the disposal of the broker’s assets,” according to a statement issued by the KSE on Saturday.

Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi visited Karachi recently to discuss the issue with the KSE management. The SECP chairman asked the KSE to settle the verified claims of small investors of ACE Securities on an urgent basis.

The statement quoted Hijazi as saying that the SECP is “fully committed” to protecting investors from all elements in the capital markets that have cheated investors and that the apex regulator will “leave no stone unturned” to bring them to justice.

ACE Securities stopped honouring its investors’ requests for cash withdrawals and share transfers following the alleged escape of its owners from the country in mid-April. It led the KSE to suspend the operations of ACE Securities on April 27. Subsequently, ACE Securities Chairman Iqbal Ismail and CEO Haroon Iqbal failed to show up at two consecutive hearing opportunities on May 6 and May 12 at the KSE, which were meant to look into the “non-resolution of a large number of investors’ complaints involving substantial amounts”.

The KSE forfeited the trading right entitlement (TRE) certificate of ACE Securities on May 15. However, investors have yet to receive any relief from the regulator with regard to their shares and cash stuck with ACE Securities to date.

The SECP chairman advised the KSE to take all possible measures to ensure full settlement of small investors’ authentic claims. “In this regard, if current regulations or Trust Deed of IPF requires revisiting, that should be done without delay and the SECP will support any positive changes that are in public interest,” the statement said.

Hijazi also advised the KSE board to expedite the submission of its proposal for strengthening the IPF further with increased contribution so that it becomes sustainable over time, the statement added.

The exchange will be able to sell the assets of ACE Securities in order to meet the latter’s obligations towards investors, National Clearing Company of Pakistan (NCCPL) and other TRE certificate holders.

These assets include securities and deposits of ACE Securities held in the custody of the exchange; securities, cash and bank guarantees held in the custody of NCCPL; base minimum capital maintained with the exchange; and all other securities deliverable to ACE Securities by other TRE certificate holders or NCCPL.

Sources say the quantum of unverified claims against ACE Securities stands around Rs350 million. In contrast, the ballpark figure for the proceeds of the sale of assets, KSE shares held in the blocked account of ACE Securities, and the amount set aside in the Investors’ Protection Fund is in the range of Rs80-90 million only.

Published in The Express Tribune, June 28^th, 2015.

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