ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has declared nine brokers as defaulters.
Chairman Zafar Hijazi has said that out of which 100 percent payments have been made to claimants of four brokerage houses and 77 percent payments have been made to other claimants he said while addressing a joint press conference along with the PSX Chairman, Muneer Kamal, and the PSX Managing Director, Nadeem Naqvi, at the SECP head office on Tuesday.
He further explained that a total 3,453 complaints were received against these nine defaulting brokers out of which 2,453 (76.8 percent) complaints were settled completely. In this regard, Rs689million have been paid to the claimants.
He also stated that 100 percent payments were made to small investors who have invested up to Rs100,000. “These payments have been made from the recoveries from defaulting brokers as well as from the investor protection fund,” he added.
The chairman said that the investor protection would remain the prime objective of the regulator. He said the regulator would ensure complete compensation to small investors.
The SECP chairman said that the prime responsibility of the regulator is to secure the small investor, bring transparency and ensure growth of the capital market.
He pointed out that there are five brokers under strict observation of the SECP and warnings have already been issued to the brokers who have overexposed their investments.
The SECP conducts off-site and on-site inspections and in more sensitive cases the inspections are done by the Joint Inspection Team of CDC, NPCCL and PSX. As the market touched new heights, a fresh wave of investors have entered the market and some brokers have started deposit taking and offering fixed profits to investors which is illegal, he explained.
Zafar Hijazi revealed that the SECP has also started operations for doing market intelligence. This is to check and preempt brokers if they continue their wrongdoings despite warnings. He also suggested to the PSX to adopt the market intelligence methodology to monitor brokers’ behavior.
The SECP Chairman said that the SECP’s regulatory enforcement is a continuing process and even today he has referred a case to NAB for investigation.
To a question, he confirmed that the SECP has already forwarded the name of defaulting brokers to relevant department to place him on ECL and that the SECP is closely coordinating with law enforcement agencies and red warrants would also be issued against absconding brokers, if needed.
The capital market’s regulators also expressed their satisfaction over the stock market working, strength and fundamentals.
Muneer Kamal said that the capital market was not only strong, stable but on right track, therefore the investors should not lose confidence due to wrongdoings of a few persons. The regulatory and oversite bodies are vigilant and proactively engaged with brokers who are vulnerable, he added. He said the SECP has adopted a methodology to conduct at least one audit of each broker in a year. There are about 303 brokers registered with PSX.
He said that the Pakistan’s market is growing and well established and there is no need for panic. As opposed to the previous crashes in stock market, the market conditions are stable and reiterated that no single group is strong enough to dictate the market’s direction. Keeping checks and balances and making queries is the right and responsibility of regulators, the SECP and PSX, he added. Therefore, the brokers should be appreciative of regulators’ proactive approach to safeguard market and investors.
While explaining the market fundamentals, Nadeem Naqvi said that the total market capitalization stands at $90 billion. The free float of shares is around 24 per cent, while one third of the shareholding is with foreign investors and one third of market share is with local financial institutions, mutual funds etc. Therefore, only 40% of the market is with retailers and because of market diversity, we believe that individual brokers cannot manipulate it, he said.
In response to a question, the SECP Chairman appreciated the Chairman Senate Committee for Finance and Revenue, Senator Saleem Mandviwalla for taking interest in the ongoing issues of the capital market and termed it a good gesture of the legislative body. Hijazi said that the SECP team would appear before the senate committee to explain the reality of the situation and the SECP’s point of view. Hijazi was very optimistic that the Senator Saleem Mandviwalla would appreciate the regulators’ efforts for bringing transparency in the market.
Hijazi said that SECP’s current actions look stringent and strict because the regulators never took such a proactive approach in the past. He expressed his determination that no relaxation would be given to brokers violating the law.
