ISLAMABAD, April 4: The Securities and Exchange Commission of Pakistan (SECP) warned research analysts and the media persons on Friday against giving advice to people to invest in any particular stocks and creating euphoria or causing the market to fall.

Though a belated one, the move is likely to check the problems often created by researchers and analysts through media by asking people to invest or pull out their money from certain stocks at certain points.

Some government advisers and researchers had issued a number of statements to the electronic media that tempted people to invest in stocks frantically thus creating a ‘bubble’ that had led to the March 2005 stock market crash.

The SECP has issued a set of guidelines through a circular, copies of which have been sent to the heads of Pakistan Electronic Media Regulatory Authority, stock exchanges, Mutual Funds Association of Pakistan, and All Pakistan Newspapers Society.

The commission has warned that the individuals, who violate these guidelines, can be punished under section 24 of the Securities and Exchange Ordinance, 1969. It provides for imprisonment for a term, which may extend to three years, or a fine up to Rs500,000 or both.

In the circular, the commission says section 17 of the ordinance provides for protecting the interests of general public against malpractices in the capital market. No person shall, for the purpose of inducing, dissuading, affecting, preventing or in any manner influencing for turning to his advantage, the sale or purchase of any security, directly or indirectly.

The section also forbids suggestions or statements, which the person himself/herself does not believe to be true. This also includes concealment of facts or planned omissions in research or statements aimed at deceiving people.

The SECP says individuals must have reasonable and adequate basis, supported by appropriate research, while making any recommendations or expressing investment related views or opinions on media relating to the securities.

However, this basis should not include commentaries on economic, political or market conditions; technical analysis concerning the demand and supply for a sector, index or industry; based on trading volume price; and statistical summaries of companies’ historical financial data.

If the individual is making use of a third-party research, he/she must make reasonable and diligent efforts to determine whether such research is sound. The circular says if individual must refrain from disseminating third-party information if he/she suspects it is biased or untrue.

The circular says the individual while expressing any recommendations, actions and other investment related views or opinions on media must disclose all conflicts of interest in a timely, clearly and prominent manner. Conflict of interest can be deemed to arise if the individual or their immediate family members have or tend to hold personal investments or carryout trading activities in such securities.

The immediate family includes spouse, children and other dependants and members.