SECP, Pakistan Stock Exchange (PSX) in Grip of Powerful Brokers?

The Securities and Exchange Commission of Pakistan (SECP), along with the top management of Pakistan Stock Exchange (PSX) seem adamant on keeping mum over the recent scam worth more than Rs 1.5 billion. This is despite lodgment of 11 FIRs in Mithadar police station and FIA Corporate Crime Circles (CCC) against Wamiq Mohammad Yousaf, allegedly a front man of Zafar Moti Securities and Adam Securities. FIA sources say that so far, around Rs 40 million have been recovered from Wamiq Yousaf during the investigation and this very same amount would soon be distributed among the complainants.

According to the SECP source, at least 20 names were recommended by the PSX, out of which SECP selected seven directors. Earlier, the PSX Board had already elected seven directors on behalf of the PSX shareholders for a period of three years. The election was held at an extraordinary general meeting (EOGM) on April 19. The Securities and Exchange Commission of Pakistan (SECP) Wednesday selected seven new independent directors of the Pakistan Stock Exchange (PSX). The sources said that 11 candidates had submitted documents to contest the election on seven seats.

Earlier, the PSX dumped the SECP’s ruling to hold fresh elections for the board of directors on February 28, 2018, taking the view that the outgoing board was constituted for three years under the Companies Act 2017 and next elections should be held in February 2019. Such is the case of a woman aged 50, who was the sole breadwinner of her family. She was deprived of more than Rs 1.5 million worth of her savings, following her friend’s advice to trade with Wamiq Yousaf, a front man of Zafar Moti Securities. In the initial meetings, Wamiq introduced her to Zafar Moti, claiming that she could be a major client.

Background interviews with investors, brokers and officials aware of the developments, claim that regulatory bodies; PSX and the SECP are being influenced by a powerful lobby of brokers. This they say is evident from the regulator’s demeanor, lacking the necessary bite for acting, regardless of several complaints lodged by numerous investors who lost millions of their hard-earned incomes and savings. Similarly, in October 2016, when the stock market was at its peak between 49,000-50,000 points, the Federal Investigation Agency (FIA) apprehended Wamiq in an alleged money-scam worth billions of rupees on a complaint lodged by six investors.

Actually, all SECP and PSX officials are involved in it and now they are trying to ruin this case to save their own skin,” she remarked. Following this incident in October 2016, the top management of Pakistan Stock Exchange (PSX) resorted to taking a notice based on the complaints filed by a few investors. Haroon Askari, Deputy Managing Director (DMD) PSX contacted Zafar Moti and Adam Securities, but both of them refused to accept the original receipts issued in favors of investors by their own agents. Thereafter, more complaints were lodged, forcing Haroon Askari to take further action and shut down the offices of the broker under scrutiny.

The few investors who tried to contact the higher management of Pakistan Stock Exchange (PSX) were told that the PSX does not know any Wamiq Yousaf and questioned the investors in return as to why they handed over their money to Wamiq without any confirmation. (Wamiq has been working out of the same office for 20 years). After this scam, the PSX issued a press release whereby it was disclosed that some brokers and TRE certificate holders are involved in maintaining a double book, however, there was no mention of the names of the brokers and the TRE certificate holders being investigated. The SECP has also issued notices to more than 20 brokerage firms involved in Badla financing.