SECP files insider trading case against bank’s employee

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has filed a criminal complaint in a court against an employee of a leading bank for his alleged involvement in insider trading and minting multimillion rupees through illegal share transactions, sources said on Wednesday.

The sources said the accused, Syed Misbah Uddin Rizvi, was serving as head, equity and capital market at the bank and responsible for the placement of orders for equity investment/disinvestment of shares on behalf of the bank.

The case was filed in the court of the session’s judge, Karachi after the SECP found that Rizvi, having inside information about the bank’s decisions to invest/disinvest, was involved in insider trading in collusion and connivance with his relatives, Syed Khalid Grami and Syed Wajid Grami.

The bank’s investment and disinvestment decisions were in line with Section 130 (g) and Section of 129 (d) of the Securities Act 2015, respectively. 

The SECP’s investigation revealed that the bank employee took advantage of the inside information and was involved in active trading in shares, which was prohibited under the bank’s employees’ prudential regulations.

The accused allegedly made millions of rupees in profit through the illicit trading, said the sources.  The analysis of the trading data of Pakistan Stock Exchange’s Karachi Automated Trading System for the period between August 24, 2012 and February 2, 2016 revealed that a number of transactions of Khalid Grami and Wajid Grami in various shares suspiciously matched with the bank. Besides, Rizvi also participated in a series of share transactions similar to the bank’s trading activities, flouting Section 128 (1) of the Securities Act 2015.

Officials said the commission also took up this matter with the State Bank of Pakistan for appropriate measures and issuance of policy guidelines. The officials said the SECP actively monitors equity trading in stock market in order to curb market abuses and unfair trading practices, such as front-running/insider trading, “which spoils the market’s basic essence.”

Front-running is a form of insider trading, but in this malpractice a person, engaged in processing or making investment decision/order, directly or indirectly uses the information in his official capacity for personal benefit.  The basic purpose of front running or insider trading, however, is to take advantage of the price movement caused by a large trading order once it is executed in the market.