IT is heartening to see the corporate sector regulator, the SECP, start moving more energetically to curb abuses by brokers in the stock market. Ever since the owner of M.R. Securities made off with his clients’ money, the apex regulator has been pursuing the matter, taking the authorities at the Pakistan Stock Exchange to task for their negligence, teaming up with the State Bank to curb the illegal use of leverage through badla in making deals with client money, and monitoring closely the positions held by a large number of brokers to ensure that they are sound in terms of regulatory compliance. All this is exactly what one expects from the apex regulator, and it can only be hoped that the new management of the PSX will cooperate better with this exercise to enforce the rules, and that the State Bank will also be proactive in lending its powers and expertise to help.

But there is one overriding priority that must be kept in mind when going through this exercise. The investors who lost their money due to the flight of the owner of M.R. Securities must be reimbursed. This will not be easy since there will be disputes over who is owed how much. But protecting the investors’ money is the main priority around which the regulatory framework for the stock market should revolve, and making that a central concern will be a useful way in which the SECP can chart its course forward. Other than this, there are numerous other examples, such as late filing of financial results by listed companies, greater oversight of the veracity of the numbers, tighter vetting of a company’s credentials prior to an IPO, and much more. Tightening up the investment environment in the country begins with regaining the trust of the investors who lose their money due to the flight of brokers. Pakistan’s stock market has a bright future ahead of it, but it must go forth into this future with the full confidence of its small investors.

Published in Dawn, February 24th, 2017