SECP chairman orders probe against market manipulators

ISLAMABAD: Zafar Hijazi, chairman at the Securities and Exchange Commission of Pakistan (SECP) on Saturday ordered investigations against a few securities brokers for market manipulation through misleading trading activity.

Hijazi directed the SECP officials to address the issue ‘through aggressive policy measures and ruthless enforcement’.

“The battle lines between the apex regulator of the stock market and the market manipulators have now been drawn,” he said in a statement.

The commission ordered the investigation under Section 139 of the 2015 Securities Act

Earlier, the SECP had tasked the stock market surveillance team with analysing the index movement’s trends to identify those who were involved in market manipulation through deceptive activity.

Detailed analysis of KSE 100-share Index movements and order placements during the period showed that some securities brokers were most prominent in deceptive trading, the statement said.

It added that these securities brokers deliberately interfered with the workings of the market to defraud investors. “They placed particularly large false buy and sell orders and created artificial market activity. During this time, significant volatility was observed in the prices of relevant securities.”

The SECP, as part of its crackdown on fraudulent trading activities, filed a number of criminal cases against brokerages and individuals in 2017.

The cases were filed against Darson Securities (Private) Limited, chief executive officer of Cedar Capital (Private) Limited, an individual who manipulated the price of shares of Gauher Engineering Limited (now Drekkar Kingsway Limited) and an employee of a leading bank, who was working as assistant vice president investment, for being involved in insider trading.

The commission is confident that crackdown on such malpractices will go a long way in protecting investors, raising government revenues by transforming the illegal into legal activity in the regulated and documented sector, and saving the foreign exchange currently being sent abroad.

The commission said some market manipulators have been defrauding the public through deceptive trading practices for a number of years. One such practice is entering bids and offers with the prior intent of cancelling them before trade execution, commonly known as spoofing. Another such practice is entering multiple bids or offers to create the appearance of false market activity.

“The actions of these manipulators are responsible for creating large movements in prices of securities that cannot be justified by any economic logic,” it added. “Such manipulation undermines investor confidence and distorts the perception of stock market as a rigged casino, which is clearly prohibited under the Part IX of the 2015 Securities Act.”