PSX suspends brokerage’s trading rights for violations

KARACHI: The management of Pakistan Stock Exchange (PSX) on Wednesday suspended licence of yet another brokerage on violation of laws and its failure to timely answer a show-cause notice.

The PSX said Amcap Securities (Private) Limited (Amcap) is flouting various clauses of the bourse’s rule book, “including but not limited to clients’ assets segregation and inaccurate bookkeeping.”

“The exchange has decided to suspend all trading terminals of Amcap with immediate effect under Clause 4.27.2 of PSX Regulations until further notice,” Abbas Mirza, acting chief regulatory officer at PSX said in a notice to the market participants.

The exchange had issued a show-cause notice to the Lahore-based brokerage on March 31, 2017, seeking a written explanation by 4 April, after it performed an ‘off-site limited scope investigation’ into the matters of observed regulatory non-compliances.

“However, Amcap sought unreasonable extension in time for the same to delay the process,” Mirza said.

He said Amcap could provide the explanation from the readily available information in its back office records “and therefore, PSX granted an extension of one day in consideration for them to collate information and provide satisfactory explanation.”

“The revised deadline has also elapsed today (Wednesday) and PSX has not been provided with any satisfactory explanation,” he added.

Since the stock market crisis in 2008, the bourse management suspended the trading right entitlement certificates of at least five brokers, which were declared defaulted. The claims against them were estimated at around five billion rupees.

Two more brokerage houses were recently added to the list of defaulters. The PSX board decided to settle claims of investors against these brokers by disposing their confiscated assets and properties. 

Market regulator, the Securities and Exchange Commission of Pakistan (SECP) had also initiated a thematic review of leading brokerage houses to avoid any systemic threat to the integrity of the capital market.

The SECP has observed a number of violations pertaining to provision of illegal in-house financing to clients and non-collection of due margin against exposure from clients.

The PSX had also warned all Trading Right Entitlement Certificate (TREC) holders to refrain from indulging in such illegal activities, and ensure meticulous compliance of all applicable provisions of the regulatory framework.

In February, PSX also suspended its chief regulatory officer pending a detailed inquiry involving default of Rs1.2 billion by a brokerage house MR Securities. The PSX board, in a meeting with the chairman of SECP, said it received a total of 485 claims against the brokerage amounting to Rs1.2 billion.

In January, a Chinese-led consortium bought 40 percent strategic stake in PSX at a rate of Rs 28 per share. The aggregate buyout amount of $85 million was released and parked into a Nostro account in order to settle the claims related to the defaulting brokers.