SECP files criminal complaint against individuals in front-running equity trading scandal

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday filed a criminal complaint against two individuals implicated in front-running equity trading, a financial crime allegedly committed with the collusion of an employee from a state-owned insurance company.

"The fraud, which occurred between October 1, 2021, and December 31, 2021, is estimated at approximately Rs5 billion," an official told The News.

The case, filed as criminal complaint number 15 of 2024 on April 8, 2024, has been referred to the Special Court (Offenses in Banks) in Karachi.

According to the findings of the SECP's investigation team, a day trader, in collusion with an investment officer from the institutional investor (State Life), engaged in purchasing shares before the placement of buy orders by the investor, subsequently selling those shares to the institution.

This pattern persisted over several months, with a significant portion of the day trader's transactions aligning with those of the institutional investor, resulting in losses for the institution and gains for the trader. The evidence strongly suggests active collusion between the investment officer and the day trader.

ECP did not disclose the name of the suspects. Front-running is an illegal practice in financial markets where a trader, typically with insider knowledge or access to privileged information, executes trades on a security ahead of a large order by another party, profiting from the price movement that the large order is expected to cause.

It unfairly disadvantages the party placing the large order and undermines the integrity of the market by eroding trust and confidence among investors.

First Digital Family Takaful Operator

In a separate announcement, the SECP declared the registration of Salaam Family Takaful Limited as Pakistan's inaugural digital family takaful operator. This registration coincides with the introduction of a regime for digital insurers and micro-insurers, aimed at advancing digitalization and enhancing customer convenience.

Digital insurers are expected to foster competition, reduce costs, and champion international best practices. Despite digital channels currently accounting for less than 1 percent of total industry premiums, the registration is poised to elevate overall industry premiums from digital channels, bolstering insurance penetration in Pakistan. The registration aligns with the Insurance Ordinance 2000.

Gender Gap Data Disclosure

Furthermore, the SECP has mandated listed companies to disclose gender pay gap data in their annual reports. This directive, in accordance with the Prime Minister's Women Empowerment Package 2024, aims to promote gender diversity within the corporate sector. To facilitate compliance, the SECP has provided a template and guidance on calculating the gender pay gap.

This initiative seeks to enable accurate assessment and reporting of gender pay disparities. The requirement applies to listed companies for the financial year ending on or after June 30, 2024. The SECP underscores its commitment to fostering gender equality and diversity in the corporate sector, considering this directive a significant step towards achieving inclusivity and equity in the workplace. By Israr Khan