SECP files criminal case against senior banker for insider trading

ISLAMABAD: Market regulator has filed a criminal complaint against a senior banker for being involved in possible insider trading, a statement said on Thursday.

The Securities and Exchange Commission of Pakistan (SECP) said the case is with the additional district and sessions judge Karachi south. The statement, however, did not give any further details.

“Based on an investigation, the SECP found that he (the banker) had inside information regarding the bank’s decisions to invest/disinvest (in stocks),” the statement said. “The bank employee took advantage of the inside information and was involved in active trading in shares, which was also prohibited under the employees’ prudential regulations of the bank, making a profit of millions of rupees.”

The statement said the SECP has also taken up the issue of bank employees’ involvement in insider trading with the State Bank of Pakistan for appropriate measures and issuance of policy guidelines.

Meanwhile, the SECP chairman Zafar Hijazi has expressed the regulator’s firm resolve to take strict action against brokerage houses and those found involved in malpractices and misuse of client assets.

“… the SECP is actively coordinating with law enforcement agencies, including NAB (National  Accountability Bureau) to apprehend the culprits involved in misappropriation of investor assets in a timely and efficient manner,’ said a separate statement of SECP, quoting its  chairman.

The statement said the SECP shared its investigation on illegal activities of raising deposits from the public/investors against promise of fixed rate of return under the umbrella of stock market investments by a few brokers with some of the leading brokerage houses.

The SECP and the brokerage houses agreed that the said activities of brokers were illegal and tantamount to defrauding the public. It was also emphasised that the investors and the public should be cautious of such illegal activities, and should not engage or be a party to any illegal investment activities.

The investors/general public should not give deposit to any broker, as it was illegal and any claim in respect of such illegal deposit would not be considered by the stock exchange, as it was beyond the scope of legitimate capital market activities.

Hijazi also urged to form a broker association with countrywide representation for self-regulation. It was agreed that a broker association would be formed, which would graduate into a SRO and play its due role.

The consultative group decided to not allow single-member companies to obtain a brokerage license due to dependency on one person and weak board structure.  

It was agreed that strict checks and balances should be maintained for opening branch offices, allowing only licensed activities with mandatory rating of such brokers from credit rating agencies.