ISLAMABAD, July 17: The Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan have devised a coordinated strategy to deal with the “international brokerage companies” collecting deposits illegally from the people.
The commission, after its own investigation and on the basis of complaints from general public, has found that the number of such illegal brokerage companies was as high as 39 and that they had established their offices at different places in Pakistan.
Under the strategy, SECP would take appropriate action against incorporated unauthorized houses and members of the stock exchanges who are involved in such business while SBP would take action against the remaining entities under the Banking Companies Ordinance.
The SECP has issued show cause notices under section 309 of the Companies Ordinance, 1984, to 10 such companies for engaging in activities ultra vires of the Memorandum and Association. Necessary decision in the matter of two companies has already been taken.
Giving details to newsmen here on Thursday, the SECP chairman said these businesses purportedly dealing in securities have been soliciting clientele from the public, collecting deposits and utilizing the same in various investments through Principals outside the territorial jurisdiction of Pakistan.
Generally, such businesses claim to be agents of principals residing and/or incorporated in foreign countries. The types of investments being advertised and offered include securities, currency trading, futures currency trading, money markets, securities’ index trading, commodity futures, options, bonds, etc.
The modus operandi adopted by these companies is that individuals desirous of dealing in futures market or foreign commodities and precious metals have to deposit in foreign exchange a sum of money as margin deposit with these companies.
Through internet, the client makes a deal/transaction or takes a position on currencies or commodities with the principals abroad without involving actual delivery of foreign exchange/commodities. The difference between sale/purchase price is settled through the margin account and, in case of loss, the margin is replenished by the client.
According to complaints received by the commission, these so-called agents of the international brokerage houses motivate the public to make investments mainly in international currencies and commodities through the internet. In fact, the so-called brokerage houses of which these companies are purported to be the agents are neither members of any stock exchange nor are registered with SECP as broker or agent.
The reported activities of these so called companies pose a serious threat to the investors because they are allegedly in such activities without any legal authority and regulatory framework, Qureshi observed.
As such, the commission published public notices in the media from its own funds to caution the general public that such brokers have no legal cover and that the chances of obtaining relief or upholding their rights were bleak as in most cases, these unscrupulous dealers, after grabbing the savings of innocent public, go into hiding.
The general public was further advised through ads to ensure that stock brokers/agents they choose to work with were duly registered/licensed by the SECP.