ISLAMABAD - About a thousand families, who had invested their savings in stock market through a brokerage firm, are in real trouble after the suspension of a firm, whose co-owner has also ran away from the country, by the regulator.
The Pakistan Stock Exchange (PSX) had suspended Stock Street (Private) Limited, an Islamabad-based brokerage house, early this month for violating investors’ rights and not maintaining client’s assets separately. This is the first suspension of any brokerage house by the PSX since the integration of Islamabad, Lahore and Karachi stock exchanges into PSX in January this year.
Many investors, who were solely depending on the stock dividends, are in real trouble. And, those who were frequently trading are mourning the loss of their hard earned investments at a time when the market is at its peak.
An MSc student from Attock had investments of about Rs50,00000 in various oil companies. Her late grandfather had bought the shares so that she could continue to get some profits as her parents had also passed away. Now I myself had started to buy and sell shares, she said, fearing things may get worse for her if the amount remains stuck for long.
A retired teacher Shokat Ali from Rawalpindi had bought the shares of Rs.4400000, investing his lifelong savings in the market after retirement. “I had opened my account in 2005. I was not expecting this situation. I’m still confused and don’t know what to do. It’s hard to raise a family solely on the pension”, he said.
Naveed Iqbal from Jhang, who had bought some shares amounting to Rs 400000, borrowed money from a friend to lift his financial conditions. He said said, “I’m heavily in debt now as the friend is demanding his money back after hearing this (suspension)”. “In the end, the low budget families are the main sufferers always as the richer businessmen have multiple securities to bear such shocks”, he maintained.
An elderly widow from Attock, whose livelihood also depends on the dividends and buying and selling of shares, said she is bankrupt. “The income was also a support for my four orphan grandchildren as three of them study and the eldest one is jobless. There are no jobs, no businesses, and the only source of income has also been taken away from us” she said.
The firm, functioning for the last 12 years, had been maintaining the accounts of nearly a thousand clients and of them 100 were frequently trading. But only a few have submitted their claims with the PSX as very few know about the practice, especially women and elderly people.
The staff has not properly guided the affectees to take proper course to get their money back as the office is closed and the employees, fearing any backlash from the affectees, are also not coming to office.
Some fear the staff seems to be accomplice to this fraud as they misguided the clients when they observed the transfer of shares without their permission. “A couple of days before the suspension my shares were moved from account” one of the clients told The Nation. “After a few days, I came to know that its co-owner, Babar Mushtaq, escaped to USA after selling shares of many clients” the client said.
The director of Stock Street, Naeem Shakar, who was a partner of the firm, did not respond despite repeated attempts. Initially, he asked to get back but didn’t answer.
Sagheer Mushtaq, Regional Head of Regulatory Affairs, Pakistan Stock Exchange, also refused to comment on the issue. But he said they have been handling the case as per rules and the company cannot restart its services without settling the issues of claimants. He also claimed that the clients are being guided to submit claims and it’s premature to say whether the firm will remain suspended or start afresh.
In an official response, the government regulator, Security Exchange Commission of Pakistan (SECP) said the Commission has issued the inquiry order in this matter. “Furthermore, the SECP resolves to take all available legal recourses to bring the culprit to justice. Moreover, the PSX has also initiated the due process under the law to resolve this matter and address the concerns of the investors”.
The PSX had already conducted hearing of the brokerage firm on this matter and advised the brokerage firm to rectify the segregation issues immediately. However, the CEO of the brokerage firm, instead of complying with the direction of the PSX, fled the country, it said.
The PSX, being the frontline regulator of the capital market, suspended the terminals of Stock Street (Pvt) Limited on May 02, 2016. And, prior to this action by the PSX, the said brokerage firm had been reporting compliant segregation status to the PSX, which upon verification by the PSX was found to be untrue and incorrect, the Commission said.