KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has approved a formal referral to the Federal Investigation Agency (FIA) to pursue legal action in the Bagasra Securities case, more than 16 years after the brokerage ceased operations, the commission announced on Saturday. Approved investor claims of nearly Rs49 million remain unpaid.
The approval allows a written reference under Section 41B of the SECP Act, 1997, enabling the FIA to initiate formal proceedings over alleged unauthorised transfers and pledging of clients’ shares, the SECP said in a statement.
The SECP began an enquiry in March 2010 after receiving complaints about unauthorised dealings in clients’ securities. The enquiry, completed in October 2013, found that clients’ shares were transferred and pledged without their consent to obtain financing and meet exposure margins. The funds were used to benefit selected clients at the expense of others.
A total of 176.204 million shares, including clients’ holdings, were pledged between July 2007 and March 2010. Banks and the stock exchange later exercised pledge calls, selling the pledged shares after default. The enquiry report also recorded that the brokerage’s directors and liquidator failed to provide the required records, leaving the committee to rely on information obtained from banks, the CDC and PSX, the statement said.
The NCCPL declared the brokerage a defaulter, while the PSX sold its membership card in 2009 and undertook claim settlements. The company ceased operations after a voluntary winding-up resolution in January 2010.
The PSX verified 333 investor claims worth Rs145.50 million, of which Rs96.57 million has been settled, including Rs75 million through the Investors Protection Fund. Claims worth Rs48.93 million remain outstanding.
The SECP’s support for the FIA’s proceedings is intended to help pursue recoveries towards settling investor claims that have remained unpaid for more than 16 years, the commission said.
