KARACHI: There have recently been media reports regarding default of stock broker with insinuations that the regulators have not performed their job well. This press release is to set the record straight and inform readers regarding certain processes falling under securities market regulations, as well as highlighting aspects that the investing public should be aware of when investing in the stock market and dealing with stock brokers. To begin with, there is a well-defined and properly structured regulatory regime under which stock brokers (in technical terms, Trading Rights Entitlement Certificate [TREC] holders) have to operate. There are thee capital market institutions, viz., Pakistan Stock Exchange Limited (PSX), National Clearing Company of Pakistan Limited (NCCPL) and the Central Depository Company of Pakistan (CDC) which all play a role in the smooth functioning of the capital market and facilitating investors therein.
Roles of Capital Market Institutions PSX’s function is to manage that (i) investors’ share buy or sell orders are executed on PSX’s trading system in a timely, efficient and secure manner by brokers and (ii) act as front-line regulator to see that brokers are in compliance with rules and regulations of the Securities and Exchange Commission of Pakistan (SECP) and PSX. NCCPL’s function is to ensure that once orders have been executed, the clearing and settlement proceeds smoothly and no market risk due to non-settlement occurs. CDC’s function is to act as depository of investors’ shares which have been transferred from NCCPL into their investment account or, as per their instruction, in their brokers’ sub-account under the investor’s name. Each of the above three capital market institutions operate under their own rules and regulations covering their specific area of operations and overall, all three institutions fall under supervision of the SECP. As a result, there is close collaboration between the SECP and PSX/ NCCPL/ CDC not only on regulatory matters but also in the area of capital market development and investors facilitation and protection.
While there are clear rules about how the brokers should deal with their investor clients, under SECP’s guidance the capital market institutions have also created safeguards to protect investors’ interest.
