SECP steps up financial monitoring of brokers

KARACHI: The securities watchdog is stepping up the financial monitoring of brokerage houses and will rank them according to the risk in a bid to enhance investors’ protection.
The Securities and Exchange Commission of Pakistan (SECP), in a statement, said it will quarterly evaluate net capital balance, number of clients, assets under custody and trade volumes of the securities firm.
The SECP’s statement said brokerage firms with highest risk rankings will be bound to get their accounts and records inspected by an inspection team based on the assessment to be undertaken every quarter.
The team will comprise representatives from stock exchanges, National Clearing Company of Pakistan and Central Depository Company to conduct and supervise the inspection.
The brokerage house ought to give the inspection team an access to the required reports and records.
The inspection report will be circulated among all the concerned offices, including the SECP.
According to the statement, the number of negotiated deal market transactions, erroneous transaction made/rectified, complaints outstanding against the broker, history of non-compliance and irregularities as well as financial statement analyses will also get appropriate weightage in the assessment formula.
The team will determine the acceptable level of compliance with the applicable laws and regulations.
The broker will be given an opportunity of being heard if a noncompliance is found. The company can contest the findings of the inspection report.
An appropriate enforcement action will be taken considering the severity and materiality of the non-compliance.
And if a broker fails to provide the documents required or fails to cooperate with the inspection team there will be a penalty of below Rs50,000/day for the period during which the broker is defaulted.
The brokerage house will be liable to pay the determined inspection fee. An official informed that the draft Joint Inspection Regulations, 2015 has been prepared and circulated for feedback, and the assessment is expected to begin from October.