SECP cracks down on financial fraud

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has ramped up its oversight of capital markets and regulated businesses, cracking down on illegal financial activities while bolstering investor confidence through technology-driven supervisory measures.

The SECP announced it had blocked 142 illegal digital lending applications and taken action against more than 50 unauthorized deposit-taking entities and fraudulent investment schemes. Complaints regarding these entities were forwarded to the Federal Investigation Agency (FIA), Pakistan Telecommunication Authority (PTA), State Bank of Pakistan (SBP), and Google for further action.

To enhance public protection, the SECP has signed a memorandum of understanding (MoU) with the FIA, enabling timely action against fraudulent schemes. The commission has also issued public warnings, flagged offending companies on its website, and moved to dissolve non-compliant entities through legal proceedings.

The SECP reaffirmed its commitment to transparency and investor protection at a recent Commission meeting, where key measures to prevent illegal deposit-taking and fraud were discussed. Oversight efforts included a review of mutual funds, insurance companies, and brokerage firms to ensure compliance and safeguard investor interests.

A joint inspection team comprising members from the Pakistan Stock Exchange, Central Depository Company, and National Clearing Company conducted a risk-based inspection of 64 securities brokers. The inspection focused on client asset segregation, margin collection, and pledged securities. The findings showed no immediate risks in brokerage activities, indicating improved compliance within the sector.

In the insurance sector, regulatory intervention resulted in Rs162 million in additional refunds to policyholders, bolstering public trust. Similarly, SECP’s engagement with public sector companies (PSCs) improved compliance in financial statement filings, with filing ratios increasing from 34 per cent to 51 per cent.

The SECP aims to adopt technology-driven supervisory models aligned with international standards. Commissioners emphasized early detection and timely intervention in high-risk cases to ensure the stability of financial markets.

However, the SECP flagged delays in legal enforcement as a challenge, citing 53 investigations and 30 criminal complaints currently under court stay orders. Adherence to Standard Operating Procedures was stressed to expedite these cases.

A review of the mutual fund industry was concluded to address risks and protect investors. The commission commended these efforts, which included assessments of client asset segregation and profit distribution processes.

Increased scrutiny in the insurance sector also focused on identifying high-risk entities, ensuring policyholders are treated fairly, and maintaining sector stability. The SECP’s proactive measures included blocking fraudulent apps and raising public awareness about illegal schemes. Actions such as URL blocking via PTA and flagging non-compliant sponsors and directors are part of its broader strategy to secure the financial landscape.

The SECP’s comprehensive oversight and enforcement actions underscore its commitment to investor protection, market transparency, and fostering confidence in Pakistan’s financial sector.