KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has decided to take stern action against the directors of ACE Securities (Pvt) Limited for defrauding its clients, initiating an inquiry in the case.

The SECP in a notice on Wednesday reassured that it was “approaching the law enforcement agencies concerned to bring the directors of ACE Securities back to Pakistan, who have reportedly fled the country. Similar request is also being made in case of the directors of Eastern Capital Limited who had fled the country after defrauding their clients”.

The SECP chairman would arrive in Karachi on Thursday to discuss the situation arising out of the default. “He will see to it that the role of frontline regulator is strengthened, enabling it to take all necessary measures in this case. He will assure all possible support to frontline regulator to cope with all such situations,” the SECP stated.

He would also hold meetings with the officials of National Clearing Company of Pakistan (NCCPL), Central Depository Company (CDC) and other stakeholders. The SECP chairman pledged: “In no circumstances SECP will show any leniency towards such culprits and every conceivable action will be taken to protect financial interest of ACE’s clients.”

The SECP also asserted it “will ensure that in the future corrective measures are in place to eliminate such criminal activities”. The apex regulator noted that all trading terminals of the ACE Securities had already been suspended on April 27 while the NCCPL also suspended the brokerage’s access to its systems.

In a related announcement on Wednesday, the Karachi Stock Exchange (KSE) observed: “Since the first complaint (against ACE Securities), the bourse followed the regulatory procedure set forth in its regulations of asking the relevant broker to respond to KSE’s questions regarding complaints.”

In order to protect investor interest, the KSE requested the CDC on April 21, 2015 to impose restrictions on ACE Securities’ Participant Account.

By Wednesday’s close “the exchange received a total of 174 complaints/claims, prima facie amounting to approximately Rs152 million”, KSE stated, adding that all back office records of the brokerage had been seized with a view to “conduct an audit by one of the top firms”.

The bourse stated that the board of directors, in its meeting scheduled for April 30 (today) would further assess the situation to take necessary actions.

The KSE observed: “It is now becoming clear that investors were facing some issues with the ACE Securities since the end of January 2015 but not a single investor complained or notified KSE until April 20. Had any untoward incident or complaint been received early on, the bourse would have had the opportunity to move into an investigative mode and perhaps limit damage to investors.”

The issue of segregation of client assets is an important aspect and that is why investors are urged to have an investor account at the CDC.

CDC periodically asks investors to verify their shares and also sends an SMS when there is any movement of their shares in the broker’s sub-account, the bourse observed and added: “In this case, the KSE is doing the maximum within its regulatory ambit to limit damage to investors’ interest.”

Published in Dawn, April 30th, 2015

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