Inside Financial Markets

SECP raises the alarm about Stock Market Surge

As the stock market crossed 50,000-point level during the trading activity on Tuesday, Chairman Securities and Exchange Commission of Pakistan (SECP) Zafar Hijazi has warned the investors and general pubic to remain cautious and avoid advice of manipulators who might misguide them. Talking to media persons here at the SECP Headquarters, the chairman SECP said that as a regulator he was not excited to see the market touching the 50,000 points but the Commission has to be concerned over the investors’ protection.

During the press conference, the SECP chairman urged the investors not to lose their hard-earned money to unscrupulous elements. They should always deal with licensed brokers who are registered with the SECP. He emphasised that this point should be constantly highlighted in the electronic and print media.

“When market is showing a positive trend and rising day by day, there is a need to advise the investors and individuals to adopt a cautious approach with a view to avoiding losses,” he remarked.

He said that the SECP has been maintaining a strict vigil against market manipulation and those who are misguiding the investors but there are certain key points that the investors too should follow.

The chairman SECP said that usually people rush with investments towards the market after any such mark is achieved, but this leads to failures as they end up in the hands of wrong people.

However, he said that there was no chance of any market crash, as the Systematic Risk Department of the SECP is active in market surveillance and monitoring, but some individuals may face losses due to ‘machinations’ of manipulators.

The SECP has also issued a set of guidelines for the individual investors telling them not to have blind trust and faith in the brokers, to trade through their own CDC account, follow the record of their investments to keep an eye on the activities by the brokers at their investments and make investments at a registered broker only.

There is an emerging trend that some people follow advises at Twitter, etc, but these could be misleading too, and after losing money they all start blaming the SECP for failing to recover their drowned investment, Hijazi said.

However, he added that the market surge is not a bubble or based on weak foundations.

“This is the result of our efforts for the last two years that the Mutual Funds are strong and stable to support the market growth,” he said and added, “Previously the foreign buyers used to dominate the market but now despite selling spree, the market is growing.”

According to the SECP records during the period from November 1, 2016 to January 23, 2017, foreign portfolio investment has offloaded stocks worth Rs38.6 billion. While the banking sector has sold shares worth around Rs9.7 billion, brokers Rs500 million and other organisations have sold their holdings worth Rs2.5 billion.

During the same period, the Mutual Funds have made buying worth Rs23.8 billion, and the individual investors have bought shares amounting to Rs14 billion, companies, Rs7.6 billion, and NBFCs have bought shares worth Rs5.8 billion.

“This situation shows that the local players are strong to counter the selling pressure triggered by the foreign investors who still account to around 43 per cent of market presence,” he added.

In other words, he said that the confidence of local investors has been restored due to the measures of the SECP to regulate capital market and local companies/investors have purchased the shares/assets being soled by foreign investors.

In this regard the SECP has issued following guidelines on Tuesday for capital market investors:

1. Always deal with a licensed broker registered with SECP

  • Your investment with the unauthorised broker is at risk and prone to fraud.
  • You may lose your hard earned money in the hands of unauthorised broker.
  • PSX and SECP will not entertain your complaint, if you deal with unlicensed broker
  • You can verify the registration from the website of Pakistan Stock Exchange.
  • Licence verification can be made by Jampunji SMS license verification service; for verification through SMS, send LV to 8181

2. Trade only through your own Accounts with the Broker & CDC

  • Your investment is not secure if you trade through account in the name of someone else.
  • You are at risk as you are not the legal owner of your money.
  • You are prone to fraud if you are investing without having Broker’s and CDC accounts in your own name.
  • Broker may use your money for churning in the market for his own benefit.
  • Only legitimate owner and accountholders can file claim in case of default of broker.
  • The SECP will not entertain your complaint, in case you traded through 3rd party accounts.
  • Carefully complete your account opening forms and obtain their copies for your record.
  • Ensure that your contact detail like address, email address and cell phone are correctly recorded in the account opening form.

3. Never authorise 3rd party to operate your account

  • The authorisation given to someone else to operate your account on your behalf can be misused.
  • Authorised person may cheat you for his personal gain.
  • Your money can be used for churning.
  • Your claim will not be entrained by broker or exchange in instance of misuse of such authorisation.
  • The SECP will not entertain your complaint, in case of any loss due to 3rd party authorisation.

4. Always make payments to broker by crossed cheque and obtain receipts.

  • You may be cheated if you make payment through 3rd party cheques.
  • Do not pay cash to broker; Payment through cash is illegal and SECP will not entertain your claim in case of default of broker.
  • Always obtain periodical statements of accounts from broker, and compare them with your records.

5. Always maintain documentary record of your business transactions so as to protect your hard earned money.

  • In absence of documentary evidence of your business transactions in the stock market, you may not be able to substantiate your claim or complaint against broker.
  • Do not sign any document without fully understanding its terms and conditions.
  • Carefully complete your account opening forms and obtain their copies for your record.
  • Never forgo obtaining all documents of transactions, in good faith.
  • Give Orders either in writing or on recorded telephone line of the broker.
  • Always obtain periodical statements of accounts from broker and CDC, and compare them with your records.
  • Obtain copy of schedule of applicable fee and charges from the broker for your record.
  • You are at risk if you are not receiving “trade confirmation” within 24 hours from your broker of all trades executed in your account.

6. Never transact on ”Tips”, insider news, Rumours or media report

  • Investment on the basis of rumours, media report or tips may lead to loss of your hard earned money.
  • Insider trading is a criminal offence and prosecution may lead to imprisonment for a term which may extend to 3 years or to a fine which may extend to Rs. 200,000,000 or 3 times the amount of gain made or loss avoided, or loss suffered by another person, whichever amount is higher.
  • Always check financial statements of a company prior to making investment in its scrip.
  • Do not transact, based on media reports, rumours, tips, or promises of guaranteed or high return.
  • Take your time to research the stock before you invest. Never trade on social media tips where the recommendation is claimed to be based on inside or confidential information.
  • Exercise extreme caution regarding social media post/messages that solicit an investment or provide information about a particular share.

7. Always maintain custody and complete control over your securities.

  • In case of default of broker, your investment will not be safe.
  • Open an account with CDC’s Investor Account Services (IAS) and subscribe to CDC online services for authorising all portfolio transfer from your account.
  • Use CDC’s Direct Settlement Service and settle your trades through IAS Account.
  • 8 The investors are cautioned to avoid making an investment decision on the basis of research report issued by a person or entity not notified by the SECP.
  • The list of Research Entities duly notified with SECP is available on SECP’s website.
  • You may authenticate notified research entities with the Jamapunji SMS service by sending REV to 8181

Complaints

[button color=”” size=”” type=”3d” target=”” link=”http://www.secp.gov.pk”]In case of any compliant, immediately lodge it with Pakistan Stock Exchange. You may lodge your online complaint with SECP through its website[/button].

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

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